Beware of VAT fraud

Delegates attend a session 'Could VAT pose a risk to Your Business' organised by Dubai Business Women Council at Dubai Chamber on Tuesday. - Photo by Juidin Bernarrd

The introduction of the value added tax (VAT) in the UAE will bring forth a number of benefits to the country's economy and business environment, but experts warn business owners to beware the threat of fraud.
Speaking at an event at the Dubai Chamber on Tuesday, experts from management consultancy, Metis, said that issues such as increased stress on working capital, the disruption of existing banking arrangements, and an increased vulnerability to fraud in the most extreme of cases, are potential pitfalls that many business owners and industry professionals haven't considered yet.
"The VAT has become a very important strategy tool for the UAE government," said corporate advisor, Grant T. Huxham. "Usually, taxation, of any kind is very clear, but there are certain codes and phrases that business owners need to be aware of. One area that has left some business owners with questions are freezones. There are 14 listed freezones that are not taxable, however you also have to be aware that there are certain freezones where the tax does apply. This is where issues of fraud can happen."
Companies which are particularly vulnerable, include small and medium sized enterprises, which according to the UAE Ministry of Economy, represents more than 94 per cent of the total number of companies operating in the country.
Huxham cautioned business owners to beware of fraudsters, especially if they regularly engage with freezones. "Many companies from overseas will send you an invoice saying that they are going to tax you, because of the VAT law. This is a case of fraud if they are not registered to collect the tax in the UAE. My advice is to set up a meeting with the relevant authorities and to ask for clarity on the topic if you are unsure. The location of the delivery of the service is important because that will determine if the VAT will be applicable to you or not."
Recently, the Dubai Business Women Council (DBWC) joined forces with Metis to equip women across the country with the necessary knowledge and skills to successfully navigate the region's complex business landscape. Both parties will jointly conduct a series of workshops at the Dubai Chamber of Commerce and Industry, on the impact of VAT on business - including operational mechanics, safeguarding against fraudulent practices, and managing working capital with banking providers.
"An understanding of the macro business landscape, especially in light of the recent introduction of the VAT, is vitally important and we are committed to ensuring our members are prepared to excel in business and society," said Dr. Raja Al Gurg, president of the Dubai Business Women Council.
- rohma@khaleejtimes.com