Google Tax will be Introduced to Russia

It has been finalized that Russia, like numerous other countries, will impose VAT on foreign electronic service providers. The new VAT legislation was approved on 29 June 2016 by the Council of Federation.

The legislation will influence the majority of services provided within the IT field. In particular, 14 kinds of services will be imposed to VAT. Some of these services include: databases, programs, hosting providers, data storage, advertising platform, automated search services, audio-visual products and graphics as well as digital goods (books or music), auctions performed online, applications, games and platforms which provide sales of goods and services.

The new legislation will not only influence foreign IT service providers like Google Play and Apple Store. The tax will also influence domestic businesses that engage in the sale of games, databases and software that can be downloaded. Two deputies, Vladimir Parahin and Andrei Lugovoi, initially recommended the actual legislation in December 2015. However, the draft was not well received since it was argued that the Russian market would be seriously affected. Local developers of cell-phone applications and games sell goods via foreign mediators such as Google Play and App Store. At the moment, App Store and Google Play are not subject to VAT on Russian Internet users purchases.

In January 2017, renowned online providers, like Microsoft, Google, Apple and eBay, will be obligated by law to register with the tax authorities in Russian. They will be subject to 18% VAT. The increase in the tax rate means that the price of goods and services will also increase. Domestic IT companies used to complain that locals preferred buying via App Store and Google Play because the price of the item they wished to purchase did not include any VAT. This era has ended.

It is estimated that the introduction of the VAT on foreign electronic services providers will boost the Russian 2017 budget by 52 billion rubles. On the downside, the introduction of the VAT may lead Russian application and game manufacturers to other jurisdictions.

Currently, the majority of companies in Russian that engage in the sale of cell-phone games have agreements with foreign app stores. Therefore, even when a Russian buys the mobile phone game, the company is subject to VAT twice. They are subject to the first VAT since they are registered taxpayers and sellers. They are subject to the second VAT due to the fact that under the Tax Code Art. 174.2, the foreign online seller will be forced to hold back VAT from the purchaser from any sales made through online stores and present these to the Russian tax authorities.

In order to gain a bigger insight on how this new VAT will influence the Russian market we will need to be patient and observe how foreign companies will react to the new changes

VAT will be implemented in UAE in 2018

The United ArabEmirates (UAE) Ministry of Finance (MoF) has recently confirmed that the forthcoming Value-Added Tax (VAT) will be implemented across the country and GCC in 2018. All GCC members have agreed to merge their tax policies prior to implementing the VAT.

It is expected that the UAE will gain Dh10 billion to Dh12 billion in VAT revenues during the first year the tax is introduced. It was confirmed that the anticipated tax revenue does not include certain sectors that will not be subjected to tax, such as education and healthcare as well as certain food products.

Specially designed committees have been assigned to evaluate the social and economic impact the introduction of VAT will bring as well as recommend at which rate the VAT percentage must be set. Upon the suggestions of the assigned committees, the VAT rate should be set between 3%-5%. Education, healthcare as well as 94 food products will not be subject to VAT.

It has also been confirmed that all GCC member states are in total agreement on which sectors will be subject to VAT. Therefore, individual GCC members will not introduce domestic tax legislations before the introduction of the unified VAT.

The UAE authorities have already approved the draft tax legislation and are currently in the preparation phase. The Technical Committee for Legislation at the Ministry of Justice has already received the draft legislation regarding VAT.

Moreover, the VAT can be implemented once two of the member states of the GCC have completed their tax legislation and present the legislation to the GCC Secretariat. Nonetheless, it is expected that the UAE will need up to two years to adopt the legislation. Therefore, it is anticipated the VAT legislation will be introduced in 2018.

It is also interesting to note that Saudi Arabia is considering introducing a VAT but is opposed in imposing Income Tax.

Remittance Tax

The UAE MoF confirmed that each GCC member state will define the suitable tax policies involving Remittance Tax since the matter is considered a state affair.

The UAE is still thinking about introducing a Corporate Tax. The majority of countries inflict Corporate Taxes with the exception of a few like the Gulf countries.

Price of Oil

When considering that oil prices have been fluctuating since the 1970s till 2008, the UAE has already gained lots of experience regarding the instability of oil prices and how the fluctuation influences the finances of the country.

Furthermore, the UAE has diversified its economy and is no longer dependent solely on oil as a source of income. In addition, it is important to point that currently oil revenues contribute far less to the UAE’s GDP in comparison to the past, when oil revenues contributed approximately 90%.

During 2014, the UAE also decreased the amount the country spent on electricity and water subsidies without facing any difficulties

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It is also significant to note that as a result of oil price deregulation, all efforts are being put towards the development of clean energy projects that will ascertain the future of the upcoming generations. 

Dubai Economy shows resilience

In spite of the plunge of oil prices, instability in China, Russia and across Europe as well as decreased international demand for commodities, Dubai remained resilient in 2015.

Based on Dubai Chamber of Commerce and Industry, Dubai remained resilient due to its diversified economy. Dubai’s diversified economy minimised the degree of impact of the negative effects international slowdowns inflicted on various sectors of the economy.

During the previous year more than 1300 new members were initiated each month by the Dubai Chamber of Commerce and Industry. Dubai encouraged international investors with more than 16 thousand companies becoming members of Dubai Chamber of Commerce and Industry last year. In all, 185 thousand companies have joined the membership of the Dubai Chamber.

Dubai Chamber of Commerce and Industry marked a 9.5% increase in membership, establishing the organisation as one of the largest-sized chambers of commerce throughout the world.

The member companies of Chamber of Commerce and Industry contribution is shown in their yearly export and re-exports numbers. In 2015 the total amount of exports and re-exports amounted to Dh286 billion of which 37% (Dh105.7 billion) were shipped to Saudi Arabia.

Dubai Chamber of Commerce and Industry also recorded a 5% increase in amount of Certificates of Origin issued in 2015 that amounted to 930,000, in contrast to 887,000 Certificates of Origin issued in 2014.

In general the United Arab Emirates (UAE) has successfully moved past its dependency on oil by diversifying its economy. The UAE has focused on strengthening other sectors such as tourism, hospitality, logistics and trade. The UAE has also focused on new innovative sectors, which will be the foundation of the country’s future progress and growth.

During 2016, Dubai Chamber of Commerce and Industry intends to continue supporting the state’s vision and enhance as well as explore the business community’s interests. The Chamber of Commerce and Industry explores and evaluates new markets and identifies business opportunities for investment and trade. The organisation will also continue with its Global Business Forum on Central Asia as well as Africa.

Dubai Chamber is committed in enhancing the development of business as well as establishing the UAE as an international business centre. Therefore, the organisation has launched initiatives to promote Dubai’s business competitiveness such as the Dubai Innovation Index, which is in accordance to the Dubai Plan 2021. The Dubai Plan 2021 aims to establish the emirate as a top business and investment destination.

  

The Chamber of Commerce and Industry also recorded an impressive 41.6% increase in issuance of ATA Carnets.

Furthermore, during 2015 took part in 66 events in 38 different cities across 30 countries, while receiving more than 670 delegations from almost 70 countries.

Trade Dispute Settlements

In 2015 the Dubai International Arbitration Centre handled a total number of 183 cases in contrast to 174 cases the organisation handled in 2014. The department of Dubai Chamber’s Legal Services handled 555 cases in all in 2015.

Evaluating Draft Laws & Legislations

Dubai Chamber reviewed and evaluated 42 local laws and drafts. In all, the Dubai Chamber review of laws rate increased by 100%. All recommendations were passed on to the emirate’s Supreme Legislation Committee and other related authorities.

Efficient Customer Service

During 2015 Dubai Chamber assisted 330 thousand customers, 15 thousand more than it served in 2014. Out of the 330 thousand customers, 66% of the requested transactions were handled in less than 6 minutes, which highlights the continuous efforts of the organisation to attract foreign investments as well as promote Dubai as a top international destination for finance and trade. 

Dubai Free Zone Council Held its First Meeting

The DubaiFree Zone Council held its first meeting. Dubai Free Zone Council is a group that manages and rules all the free zones in Dubai.

Dubai is home to 22 free zones, which specialize and engage in a variety of industries. Based on state data, Dubai is home to approximately 20000 companies and about Dh515 billion of trade operations. The emirate has set up free zones that engage in education, e-commerce as well as healthcare with the intention to develop and specialize in these economic fields.

In 1985, Dubai launched Jebel Ali Free Zone, which is currently the emirate’s largest-sized free zone. Approximately 80% of Jebel Ali Free Zone’s land is occupied while it is also provides 7% of all employment in Dubai. During 2015, Jebel Ali Free Zone registered 650 additional companies.

Free zones allow foreign ownership restrictions as well as federal hiring limitations. Based on state data, free zones are accountable to approximately 25% of the emirate’s GDP. 

DMCC & AstroLabs Boost Business Startups to Expand in Dubai due to Launch of New Tech Hub

The Dubai Multi Commodities Centre (DMCC) and AstroLabs platform have recently launched the Middle East and North Africa’s (MENA) first Google-partnered technology centre. Dubai’s AstroLabs will aid businesses set up within the DMCC while granting access to Google for Entrepreneurs. Google for entrepreneurs is an international and resourceful network.

 

More than 350 businesspeople have already showed interest in AstroLabs new DMCC premises. The 6500 square feet includes five conference and meeting rooms, a Google mobile lab, an events and training unit as well as the 59 Degrees artisan coffee boutique. AstroLabs new premises are found in Jumeirah Lakes Tower in Dubai.

The DMCC has been commemorated with as the Global Free Zone of the Year award by Financial Times FDI magazine.  

The DMCC strives in creating an innovative and contemporary environment where startups have the ability to create, innovate, expand and thrive. With DMCC’s newest addition, the AstroLabs, which is the only technology hub across the MENA to have collaborated with Google, the free zone is facilitating talented entrepreneurs to realize future innovations.

DMCC and AstroLabs cooperation grants startups with fast and subsidized business licenses, company bank accounts as well as helping owners or founders of businesses to gain United Arab Emirates (UAE) residencies. The DMCC grants businesses with 100% foreign ownership. The DMCC has also introduced platforms that allows entrepreneurs to register and receive a business license online, making the whole procedure much faster.

Muhammed Mekki and Louis Lebbos, two local entrepreneurs, founded AstroLabs. During the last two years, Muhammed Mekki and Louis Lebbos have trained hundreds of new startups throughout the MENA. AstroLabs provides technology-linked startups many features including mentoring services, business licenses to establish a business within the UAE as well as a custom co-working space. All of the members of AstroLabs automatically become members of Google for Entrepreneurs Passport Programme. The exclusive programme allows entrepreneurs to access more than twenty Google hubs throughout the world.

AstroLabs has already hosted startups from 27 countries across 15 industries. Currently, AstroLabs is in the process of creating an entrepreneurs community that can compete on an international level. More than 25% of AstroLabs members in Dubai are women.

AstroLabs has already obtained an HR platform as a member. The HR platform is Beneple. AstroLabs is positive that many other members will join and set up businesses within Dubai, thus providing investments and growth. It is important to mention that AstroLabs has already influenced the regional startup network. In December, AstroLabs has already organized an event for Google for Entrepreneurs Exchange Programme, where twelve leading international-recognized travel startups will attend in Dubai.

Dubai, one of the leading emirates, has all the rights features to grow into a top international hub for technology startups.

Denmark &UAE sign exchange of information agreement

Denmark and the United Arab Emirates (UAE) signed a Tax Information Exchange Agreement during the latter delegation visit to the Scandinavian countries.

The UAE is strategically promoting tighter relations with diverse trade partners. The UAE delegation was led by headed by the UAE Minister of State Affairs, Obaid Humaid Al Tayer. The UAE team visit Copenhagen, the capital city of Denmark.

The Danish Ministry of Taxation, Karsten Lauritzen and the UAE Minister of State Affairs, Obaid Humaid Al Tayer, signed the Tax Information Exchange Agreement between Denmark and the UAE.

While in Denmark, the UAE delegation paid the Amager Resource Centre (ARC) a visit. The ARC is one of the most innovative and modern energy factories across Denmark. The factory specializes in producing energy from waste. Furthermore, the UAE delegation visited the Ramboll Group, a company that engages in green engineering. Ramboll Group’s MENA headquarters are found in the UAE. The Ramboll Group presented various sustainable projects that will take place across the Middle East.

The UAE’s visit to Denmark mirrors the country’s commitment and determination to strengthen ties and boost trade relations with countries across the globe. The UAE is especially focusing on strengthening ties with Scandinavian countries to tighten governmental work mechanisms founded on sustainability principles and innovative policies. 

The UAE stresses the vitality of exchanging tax information, and that the agreement is considered as an important foundation for the future economic collaboration between the two countries. This is because; the agreement boosts economic transparency and ensures justice for both company and individual taxpayers that are members of the Global Forum on Transparency as well as Exchange of Information.

UAE: Willing to Introduce Taxes

The United Arab Emirates (UAE) is willing to introduce taxes. However, before any decision is made, the government confirms it will examine and evaluate the advantages and disadvantages before introducing new taxes.

The UAE government discusses matters and issues extensively before making any decision. The government evaluates each matter and analyzes the affect their decision will have on the general competitiveness of the country. Having said that, the UAE is a member state of the GCC, thus in regards to the introduction of a VAT all the GCC countries need to make a unanimous decision. 

The UAE government has not specified what kind of taxes it plans to introduce and when it plans to introduce them. Currently, tax discussions revolve around the implementation of a VAT, Corporate Tax and a tax on remittances. The introduction of taxes is significant to the UAE as its oil revenues have declined due to the decrease of oil prices.

The GCC have undertaken several studies regarding the introduction of draft VAT legislation. Nonetheless, the GCC has not made a final decision due to the fact the member states have not yet concluded on the rate of the tax and tax exemptions.

Tax & Economic Implications

As aforementioned, several studies have been conducted to evaluate the affect the taxation will have on the economy and society. The latest study began in 2014 and was completed at the beginning of 2015. 

The studies review to what extent taxes will affect the growth rate of the UAE economy and its global competitiveness.

Once a final decision has been made regarding the introduction of VAT, the UAE government will make an official announcement to inform companies and the public. The entities and sectors that will be subject to the VAT will be allowed a period of 18 months after the tax is introduced in order to adjust, fulfil and comply with their tax obligations.

Several studies have been conducted regarding  the Corporate Tax the UAE is planning on introducing in order to evaluate the extent the introduction will influence companies in general. A draft law is still being reviewed and the tax rate has not been set.