MEADFA addresses VAT and impact on future GCC sales

By Doug Newhouse |

Some of the Medfa Board which is in place until 2019The Middle East and Africa Duty Free Association (MEADFA) board has invited its members to provide their input on how those potentially affected by the January 1 2018 implementation of the 5% value added tax in the GCC countries are proposing to approach this issue.

 

In an urgent circular to all members the association, the board has emphasised that member’s views and assessments are ‘vital’ to determine the association’s course of actions prior to the implementation of this new law.

 

For the uninitiated, this will see a 5% value added tax introduced in all six Gulf Cooperation Council member territories from January 1 next year, including Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (Abu Dhabi, Ajman, Dubai, Fujairah, Ras al-Khaimah and Sharjah).

 

MEADFA LOOKS FOR CONSENSUS VIEW ON VAT

The request to members follows an earlier meeting of the MEADFA board to discuss the GCC Framework agreement for the tax which is due to be implemented by January 2018.

 

The circular to members said: “The implementation of this new law is unclear on the VAT treatment of duty free sales and sales made within airport(s). The issue was raised during this board meeting for discussion and clarification. The main concerns are the abolishment of duty free sales intra GCC, the introduction of VAT refund and the rules applicable to arrivals duty free sales.

 

“It was viewed that a common paper and interpretation of the law should be prepared by all the members operations of the GCC in an attempt to reach to a unified law for all the duty free sales in GCC airports.”

 

The board circular adds that at a later stage MEADFA is suggesting it should organise some workshop meetings to try to reach a consensus view on these issues.

 

MEADFA BOARD 17-19

(Above) The current Meadfa Board. This year’s MEADFA Conference 2017 is being held on Nov 20-21 in Beirut where all the board members and committee officers will be present. The Board now comprises the President: Haitham Al Majali, Jordanian Duty Free Shops; Vice President: Nuno Amaral, Aer Rianta International Middle East; Treasurer: Tarek Hamila, Hamila Duty Free; Secretary General: Sherif Toulan, International Duty Free and Trading Agencies Ltd. (Committee Officers): Sean Staunton, Dubai Duty Free; Luis Gasset, Qatar Duty Free Company; John Reynolds, Chalhoub Group; Erik Juul-Mortensen, Tax Free World Association; Taleb Izmigna, Dufry Jordan – Jordan Airport Duty Free; Karl Raphael, Aphrodite Duty Free Shops; and Nicolas Van Brandt, IDF Africa & Middle East DWC – LLC.

 

REDUCING THE DEPENDENCE ON OIL…

According to the United Arab Emirates Ministry of Finance, one of the reasons for the implementtion of this new tax is to help governments reduce their dependence on oil and other hydrocarbons as sources of revenue. In its rationale for the new tax it says: “The UAE Federal and Emirate governments provide citizens and residents with many different public services – including hospitals, roads, public schools, parks, waste control, and police services.

 

“These services are paid for from the government budgets. VAT will provide our country with a new source of income which will contribute to the continued provision of high quality public services into the future.”

 

The UAE Ministry of Finance has also made it clear that tourists will also pay VAT as its Q&A for businesses and citizens explains under section 3 of the frequently asked questions section on the UAE Ministry of Finance website [https://www.mof.gov.ae/En/budget/Pages/VATQuestions.aspx]

 

Retailers looking to be price competitive with other regions won't welcome the 5% VAT levy, including DDF which ihas worked hard to stay competitive

Retailers looking to be as price competitive as they can with other regions won’t exactly welcome  VAT being added to duty free prices from January 1 2018 – especially VAT doesn’t have a tendency to go down once it is implemented. Shown here, Dubai Duty Free at Dubai International Airport.

 

 

Asked if tourists will also pay VAT, the MOF answer is categorical: “Yes, tourists are a significant source of revenue for the UAE and will pay VAT at the point of sale. Nevertheless, we have set the VAT rate deliberately low so that VAT is a limited burden on all consumers.”

 

Under the present proposed VAT regulations from January 1 2018, the UAE MOF states that a business must register for VAT if its taxable supplies and imports exceed the mandatory registration threshold of AED375,000 ($102,080). Furthermore, a business may choose to register for VAT voluntarily if their supplies and imports are less than the mandatory registration threshold, but exceed the voluntary registration threshold of AED187,500 ($50,904).

 

ZERO RATED ITEMS…

At press-time the only sectors that the Ministry confirms will be VAT-zero rated are as follows: Exports of goods and services to outside the GCC; International transportation, and related supplies; Supplies of certain sea, air and land means of transportation (such as aircraft and ships); Certain investment grade precious metals (e.g. gold, silver of 99% purity); Newly constructed residential properties that are supplied for the first time within three years of their construction; Supply of certain education services, and supply of relevant goods and services; Supply of certain Healthcare services and supply of relevant goods and services.

 

In addition, the Ministry states that the only sectors that will be exempt from VAT include the following: The supply of some financial services (clarified in VAT legislation); Residential properties; Bare land; and Local passenger transport.

 

The Americas

Details emerge of JFK T1 commercial programme and duty free tender

Qualified travel retail operators are being invited to participate in a request for proposals...

Asia & Pacific

Asia Pacific Travel Retail Awards: The Winners

TRBusiness and m1nd-set can today (13 March) reveal the winners of the 2024 Travel Retail...

International

JCDecaux research offers major passenger insights

New research insights from Ipsos UK compiled for JCDecaux provide a revised outlook of air...

image description

In the Magazine

TRBusiness Magazine is free to access. Read the latest issue now.

E-mail this link to a friend