News from Panis

Federal Tax Authority in UAE clarifies VAT on gold, diamond deals in UAE

The Federal Tax Authority (FTA) in UAE on Wednesday clarified that the new Cabinet decision issued about VAT reverse charge mechanism for the gold and diamond industry will only pertain to commercial transactions between registered dealers.

The General Data Protection Regulation (GDPR)

The General Data Protection Regulation (GDPR) is due to come into force in all EU member states on 25 May.

The GDPR is created to regulate how businesses should take care of personal data. It applies to small and medium-sized enterprises (SMEs) as well as to large corporations.

Data controllers must make clear how they collect people's information, what purposes they use it for, and the ways in which they process the personal data. Companies must also use plain language to convey these things clearly and coherently to people.

Proposed changes in the VAT implementation mechanism for the gold & jewellery sector in Dubai

According to the Dubai Gold & Jewellery Group they have been informed by DMCC that the sector may receive the below mentioned special considerations for VAT and these changes in the implementation could be in effect in a few months’ time:

Key changes of the corporate income tax reform

For taxable periods starting on 1 January 2018 or after, several new measures with respect to corporate income tax are effective. The new measures are part of the law on corporate income tax reform of 25 December 2017.

Panis highlights the most important changes.

Withholding tax on paid-up capital reimbursements

As from 2018 onwards a reimbursement of paid-up capital will become proportionally taxable as a dividend distribution, in case the company has a balance in retained earnings.

A reduction of capital will be considered to be pro rata a reduction of capital and pro rata a distribution of retained earnings. On the distribution of retained earnings, a dividend withholding tax of 30% will be due – if no exemptions or reductions are applicable.

Dubai VAT registration is now open

The UAE Federal Tax Authority (FTA) announces that online registration for VAT is now open.

  • All businesses with a turnover exceeding AED 150m should apply for registration before 31 October 2017.
  • All businesses with a turnover exceeding AED 10m should apply for registration before 30 November 2017.
  • All businesses that must be registered by 1 January 2018 should submit their registration applications before 4 December 2017 to minimize the risk of not being registered in time for the beginning of the new year.

A business must register if:

Advance tax payments encouraged

The interest rate to calculate the penalty for insufficient prepayments will increase from 1% to 3%, leading to an average tax increase of 6,75% from income year 2018 (tax assessment year 2019) onwards. For such reason Panis strongly recommends you to make advance tax payments.

Belgian government announces corporate tax reform

The Belgian Government reached an agreement on a corporate tax reform. The reform will be implemented in two stages in 2018 and 2020. Panis highlights the key points of this plan that affect the diamond sector. Most important key point is a gradual drop of the company tax rate. For large companies, the general tax rate of 33,99% becomes 29,58% for income year 2018 (tax assessment year 2019), and 25% for income year 2020 (tax assessment year 2021).

Benefit of advance tax payments

By making advance tax payments, your company can avoid a tax surcharge on the corporate tax. If the advance tax payments are made on a regular basis and before specific dates, your tax position can be optimized.

Carat tax regime not applicable to diamond brokers

The carat tax regime is not applicable to diamond brokers.

The definition of a ‘broker’ can be found in the Q & A on the AWDC website, under Question 5.

A broker is an intermediary who sells diamonds in name and for account of a principal, and never becomes the legal owner of the merchandise. (S)he charges a commission fee and does not realize any turnover from diamond trading.

The broker must be able to proof that (s)he is acting for the account of a principal, and not trading from the own diamond stock. Following indications might prove this practice: