Crevaty consulting UK

Crevaty expanded its business to The United Kingdom

We are pleased to announce that Crevaty has now expanded into the United Kingdom under the name of Crevaty Consulting UK LTD.  We have opened our office in the UK with effect from 1st July 2020.  Our expansion into the UK will allow us to introduce our services to new clientele.

Our offices are located at 1 Park Village West, London, NW1 4AE, UK.

Our main focus is to help our clients by taking care of their taxation, accounts, finance and administrative functions and by providing them with up-to-date, relevant information for their decision making process.  In doing so, we allow our clients to free up their time and resources to concentrate on their core business activities.  We are trusted partners to all small and medium-sized entities who wish to engage in businesses professionally and joyfully thereby helping them to cross the border to the next level.  We wish to continue our services in the UK as we currently do in the UAE, Bahrain and Sri Lanka by creating value to the society.

The services we offer in the UK are as follows,

  • Bookkeeping
  • VAT Returns
  • Payroll and CIS
  • Management Accounts Preparation
  • Final Accounts Preparation
  • Corporation Tax
  • Personal Tax
  • Other Consultancy work

Our Managing partner in the UK is Marius Ranasinghe who is a high performing individual with a passion for developing businesses.  He is a self-motivated, dynamic and adaptable Finance Director/Partner with more than thirty years of experience in the field of both public practice and in industry.  He carries vast and valuable experience working in the field of Public Practice and Industry  in the UK. He has the ability to support clients to improve their business efficiency and to provide effective contribution to team situations.  Marius Ranasinghe is also a Fellow Chartered Certified Accountant (FCCA).

Mr. Marius Ranasinghe

You can contact Mr. Marius Ranasinghe through below channels and we at Crevaty, are  waiting and ready to serve you at your disposal in the United Kingdom.

Crevaty Consulting UK LTD
1 Park Village West, London
NW1 4AE
United Kingdom

M: +44 (0)7973 137 175
T: +44 (0)20 7813 1348
F: +44 (0)20 7813 1348
marius@crevaty.com

Your bookkeeper will save your money

How your bookkeeper will save your money?

Looking for new ways to save money in your business for more growth? Have you thought of hiring a bookkeeper for your business? Do you know how much money a good bookkeeper can save you? Although you might feel like the idea of hiring a bookkeeper is quite expensive, hear us out first because we will tell you how you can find affordable bookkeeping service in UAE at the end of the blog post. So let’s start.

In the initial days of your business operation, you may have taken the majority of bookkeeping and accounting duties on yourself. But as your company grows, hiring a financial professional to take care of all your accounting records becomes more critical to the success of your organization. Professional bookkeepers facilitate smooth financial management and efficient operation of your business, and can also save you considerable sums of money.

Professionalism

While it’s fairly self-evident, it’s worth reiterating that hiring a bookkeeper means your finances are managed by a professional. Regardless of how educated you are, it’s a safe bet that a professional bookkeeper will manage and keep track of your finances better than you can personally.

Yes, you’re paying for the privilege, but consider the fact that you’re shelling out money for accurate, well-organized, and cost-effective records of your company’s money. In a sense, you’re not only paying for accuracy, but for the peace of mind and expediency that a professional bookkeeper provides.

Ultimately, the expense is more than just worthwhile. Keep in mind that if you did your own bookkeeping, any mistakes could potentially have serious immediate and long-term financial consequences for your company. The time it takes to find, correct, and redo errors may put an additional significant divot in your company’s finances.

Makes Managing Your Profit Margin Simple

If you are a small business, you might work with very low-profit margins. This is why you need to find ways to increase your margins. And a bookkeeping service will help you do just that.

A professional bookkeeper like Crevaty will help you keep track of your margins and offer you useful insights on ways you can leverage your low-profit margins for substantial returns. Managing your monthly transactions, a bookkeeper will make sure all your payrolls are handled well, VAT payments are taken care of and all your bills are paid on time.

Also, outscoring accounting department will save significant amount of money comparing to own (in house) accountant. 

Cutting Down on Responsibilities

When you started your small business, you probably take care of the total operational responsibilities for the business. As your business grows, operational responsibilities increase, sometimes exponentially, and may quickly reach the point where running the business simply can no longer be a one-person job.

Hiring a professional bookkeeper frees you up to attend more to the central responsibility of managing and growing your business. Reducing the number of stressful tasks that use up your attention on a daily basis helps you function more efficiently in your role as owner and manager, and should ultimately result in increasing the financial fortunes of your company by a margin much more than the cost of the services of a professional bookkeeper.

Reduce the Stress of Taxes (VAT)

We all know the panic that comes with the tax deadline, and it’s not a pleasant experience unless you have everything well-managed. You can avoid this tax deadline stress altogether when you have a bookkeeper because he or she will effectively manage expenses, salaries, write-offs, and budgets timely-thus saving you money on taxes, plus the hassle.

Keep control of your financial data

Not many small businesses can afford their own accountant. But if you are using online accounting software to manage your financials, your bookkeeper will easily be able to collaborate with your online accountant to ensure you better control of your financial data.

Instead of the business owner researching accounting rules, learning how to use software, and putting together their own financial reports, bookkeepers handle all of this for them. That saves time, money, effort, and energy and reduces the risks of small errors that can completely throw off the information. Most of the software’s like Xero, Quick Books, Zoho and many others are giving very well sophisticated flatforms with minimum cost. 

Reduce mistakes and errors

A bookkeeper will simply be an extra pair of eyes watching your cash flow so you can ensure your money is running smoothly in the business.

Having someone else to check your numbers will help you keep your cash flow seamless while reducing costs that can occur due to mistakes and errors. 

A bookkeeper will save you money significantly. So, all you need now is to find an excellent and affordable bookkeeper in UAE for your business.

Lucky for you Crevaty has a reputation for just that. – High-quality bookkeeping service in UAE for an affordable price. Contact us today.

Why SMEs are important to any economy

Successful businesses help economies to thrive. What if the scale of the business was taken into consideration? Do SME’s really make an impact on the economy? 

For a growing economy, businesses should be of great value. In theory, if you think larger the business module higher the value towards the economy – think again. Let’s look at some of the most crucial factors that add value to a business, regardless of their scale, and see how SMEs deliver in each case.

Adaptability and quick response

In an ever-changing economic climate, agility and adaptability are what separates a considerable loss or a gain.

Timing is everything. Micro-businesses have their owners working on the front lines of their businesses’ while the contrary has the influential decision-maker detached from the customer experience resulting in late response to trends alongside slower decision making. Thus, SME’s are better at identifying and embracing new trends in the industry, than their larger, more complex rivals.

Customer loyalty

Don’t get us wrong. Large enterprises provide the greatest convenience. But in an attempt to serve a larger audience, they tend to over-generalize their scope. Focusing on impressing and paying off (rich and possibly foreign) shareholders than delivering customer needs causes them to loose on customer loyalty.

Small businesses, on the other hand, are all about customer service, loyalty, and giving back to the community while specializing in the areas of service provided. 

Local Engagement

Small sector occupations provide opportunities to many capable and potential entrepreneurs who are deprived of appropriate opportunities. Together with the element of low risk in SMEs attracts a higher growth in employment. SME’s help releases scarce capital toward productive use of the community and empowers a strong middle class and emerging lower class, reducing wealth gaps.

Community Identity

Due to their uniqueness and rarity, SME’s helps in the creation of localized value, creating an identity to the local areas, unlike highly branched and overly mainstream businesses. Customers don’t always prefer mainstream, especially tourists, whose sole purpose of travel is to seek unique experiences. SME’s, therefore, act as a linkage institution between citizens, tourists, entrepreneurs and city officials strengthening community relationships, unlike any other module. 

Diversity

Small businesses also have more flexibility, and can be started by almost anyone. That makes them more diverse in form, function, culture, and potential than large corporations. The greater diversity we have in the economy, the easier it is for the economy to withstand tough conditions.

It is made pretty clear that SME’s provide occupations of greater value than other entrepreneurship schemes, thus helping a country’s economy. In developing countries, they account for 60% of GDP and over 70% of employment. While in developed countries, they provide a crucial contribution to mature economies – especially ones hit by negative growth and stagnation.

Small businesses and startups are what keep our economy strong, if you’ve ever considered starting a business, know that there is no “perfect” time, you have to take the plunge at some point. Entrepreneurs like you are what keep the market alive.

If you are interested to change your life with business opportunities, our SME consultants can show you many ways to start your business. Please contact us through our website info@crevaty.com  

Conditions to claim input VAT in UAE

Things that you need to know before claiming input tax

It is possible to recover all input tax based on invoices? No.

This article we provide an overview of conditions to claim input Tax in UAE. VAT is an indirect tax govern by public (Government) which is imposed on goods and services at each stage. You need to fulfill certain conditions when you recover VAT as input tax.

Tax paid on the procurement’s / expenses is referred to as input tax. Unless otherwise specifically mentioned under the Decree Law UAE, the credit of such input tax shall be available to the registered person subject to fulfillment of prescribed conditions.

If you are not registered for VAT, you are not able to reclaim VAT on goods or services.

If you are registered for VAT, the general rule is VAT can be reclaimed on goods and services bought by the business to make standard, or zero – rated supply. Below conditions should be met,

  1. Recipient must be a registered person for VAT under UAE federal Tax Law.
  2. The recipient obtains and also keeps the tax invoice as specified in Executive regulation on Federal Decree-Law.
  3. The goods or services must have been acquired for an eligible purpose and used or intended to consume for make taxable product. (Exempt supply businesses cannot recover input tax, personnel expenses cannot recover input tax, entertainment expenses cannot recover input tax)
  4. The amount of VAT which the recipient seeks to recover must have been paid in whole and part, or have been intended to be paid. (Time frame to claim input tax)

Let us go into detail to understand on item 2,3 and 4 sated above. Item 1, is simple.

1. Registered person

The Taxable Person issued with a TRN (tax registered number)  by FTA considered as registered person or Registrant If someone need to verify person/business is registered for VAT, they can log in to  https://tax.gov.ae/ and enter the TRN and verify. This option is available to public to any TRN.

2. Tax Invoice

A Tax Invoice shall contain specified particulars in order to qualify as recoverable input tax invoice. Below is the content of full tax invoice as per the Article 59 of the Executive Regulations with regards to tax invoices.

  • The words “Tax Invoice” clearly displayed on the invoice.
  • The name, address, and Tax Registration Number of the Registrant making the supply.
  • The name, address, and Tax Registration Number of the Recipient where he is a Registrant.
  • A sequential Tax Invoice number or a unique number which enables identification of the Tax Invoice and the order of the Tax Invoice in any sequence of invoices.
  • The date of issuing the Tax Invoice.
  • The date of supply if different from the date the Tax Invoice was issued.
  • A description of the Goods or Services supplied.
  • For each Good or Service, the unit price, the quantity or volume supplied, the rate of Tax and the amount payable expressed in AED.
  • The amount of any discount offered.
  • The gross amount payable expressed in AED.
  • The Tax amount payable expressed in AED together with the rate of exchange applied where the currency is converted from a currency other than the UAE dirham.
  • Where the invoice relates to a supply under which the Recipient of Goods or Recipient of Services is required to account for Tax, a statement that the Recipient is required to account for Tax, and a reference to the relevant provision of the Decree-Law.

3. Eligible purpose

Every business has certain common business expenses which are incurred on a day to day basis. All are not qualified claim input tax.

The expenses on which input VAT recovery is blocked can be categorized as per below.

  • Entertainment expenses
  • Motor vehicle used for personal purpose
  • Expenses incurred on exempt suppliers
  • Some employee related payments

We can briefly explain these categories as follow,

Entertainment expenses

VAT incurred on any costs which are used for a genuine business purpose, or which are incidental to a business purpose e.g. food and drink provided during a business meeting, shall be recoverable (subject to normal VAT recovery rules). However, where the hospitality provided becomes an end in itself and could be construed as the purpose for attending an event, such costs will be considered to be entertainment in nature and the VAT incurred shall not be recoverable. The type of entertainment expense which is not allowed for input VAT recovery include hospitality (Examples: Accommodation, food and drinks) which in not provide in normal course of meeting, access to shows or events, trips provided for the purpose of pleasure or entertainment. To understand more on the concept, FTA has issued guideline through public clarification. You can refer the same though this link – https://tax.gov.ae/-/media/Files/FTA/links/Public-Clarification/05-VAT-Entertainment-Services.pdf

Motor vehicle used for personal purpose

In general, a person registered under VAT is allowed to recover VAT incurred on the purchase, lease or rental of a motor vehicle which is used for their business activities. However, Motor vehicle is used for the personal use of person in the company, it cannot be claimed VAT on expenses relating to motor vehicles and fuel expenses.

Here, a ‘motor vehicle’ is any road vehicle which is designed or adapted for the conveyance of no more than 10 people, including the driver. ‘Motor vehicle’ does not include a truck, forklift, hoist or other similar vehicles. This rule ensures that the VAT incurred on essentially commercial vehicles is not blocked due to incidental private use.

A motor vehicle will not be treated as being available for private use if it is within any of the following categories,

  • A taxi licensed by a competent authority
  • A motor vehicle registered and used as an emergency vehicle, including by the police, fire brigade, paramedics, or similar emergency services
  • A vehicle which is used in a vehicle rental business where it is rented to a customer

Expenses incurred on exempt supply

Some of the selected supplies in the sectors categorized as exempt supply under UAE VAT law and treat as outside the scope of VAT. Examples of some financial Services, Sale or rent of residential buildings following the first supply, supply of bare lands, local passenger transport services etc. In such cases, input related exempt supply will not be able to recover. This area is complex and need to review case to case where most of the cases it will come under mixed supply and need special tax recovery calculations.

Some employee related payments

VAT paid on employees related expenses will not be recoverable by the business where the goods and services are purchased to be used by employees for no charge to them and for their personal benefits.

Above rules are not applicable following situation,

  • Where the employer has a legal obligation to provide those goods or services to the employees under and applicable UAE Labor low.
  • Where it is a contractual obligation or documented policy of the employer to provide those goods or services to employees, to enable them to perform their duty, and where it can be proven to be normal business practice to do so in the course of employment.

Example – VAT paid on Medical insurance on behalf of staff and their dependence need to evaluate accordingly. Not all the cases can claim full input tax on the same.

4. Time Frame to claim input tax

Input tax must be recovered in the first tax period in which two conditions are satisfied,

  • The tax invoice is received
  • An intention to make the payment of consideration of the supply before the expiration of six months after the agreed date of payment is formed

Upon receipt of a tax invoice, you can recover input tax only when an intention to make the payment within a prescribed period is formed. Hence, planned payment period is very important before you claim any input tax. Where a taxable person fails to make the payment of consideration before the expiration of six months after the agreed date of payment, the taxable person should reduce the input tax in the VAT Return of the tax period following the expiry of the six-month period. However, once the payment is made, the taxable person will again be entitled to recover the input tax.

For an example, if a company receive a tax invoice for AED 10,500 on 30th May 2020 and agreed to pay within 30 days. Hence payment due date is 30th June 2020 and the company claim its input tax of AED 500 during the tax period of 01st of April 2020 to 30th June 2020. However, if company fail to make the payments until 30th December, 2020 then the eligibility of claimed input tax of AED 500 is invalid. Hence, adjustments need to made after the 30Th December, 2020 in the tax return to reduced AED 500 in the input tax. Again, once the company made the payment in later period, it is allowed to claim input tax again after the payment.

Due to the time frame of input tax claim, companies must review age payable list with the due dates/ agreed payment dates with suppliers to closely review the eligibility of input tax claimed in earlier periods. FTA clarify time frame to claim input tax under the public clarification and please refer the same through the link https://tax.gov.ae/-/media/Files/FTA/links/Public-Clarification/Time-frame-for-recovering-Input-Tax.pdf

Conclusion

VAT registered companies are responsible for VAT. They are eligible to set off their output VAT (Sales) with Input VAT (Expense). Companies cannot claim all input VAT and need to evaluate the eligibility on the same.

Hope this will help you to get understating on conditions to claim input tax in UAE. If you need help, please contact us through www.crevaty.com

Internal Audit – is more than what you think

The severity of the current global economic downturn has left organizations around the world searching for ways to contain costs, improve efficiencies, maintain customer satisfaction levels and protect their balance sheets. This unprecedented economic crisis has been nothing short of an urgent call to action for more robust risk management practices in global organizations of every size and industry.

In retrospect, the role of the internal audit (IA) function may have been somewhat ignored in the economic storm. As organizations struggle, we see more of them recognizing that IA is positioned to play a critical role in helping to manage the change that must come. These organizations are looking to IA to provide assurances that existing and emerging risks are identified, monitored and managed so that they can move forward with confidence in executing their business model. This issue explores how IA can contribute to organizations as they recover from the crisis and what management and boards should expect of IA going forward.

However, let’s begin with what exactly is an IA.

Take a fresh look at the role of IA

The role of an IA is to provide independent assurance that an organization’s risk management, governance and internal control processes are operating effectively.

When done right, an IA will answer to questions like whether you have any gaps in your company policies and procedures, does you company meeting compliance goals, comply with laws and regulations and much more. Plus, it will provide you with useful insight into your organization’s culture, policies, procedures and more.

The process involves the board of directors or the board of trustees, the accounting officer or the audit committee. And the evaluation and reporting will be done to the highest level in the organization.

Let’s have a look at why IA are essential for an organization.

Why IA are essential for an organization?

Increase in productivity 

The goal of IA is to add value and improve the operations of the company. Thus, it will help with strategic objectives achievements in an organization helping you with risk management, control, and other governance processes with its highly disciplined approach to evaluation. 

Confidence to stakeholders

One of the main benefits of IA for a company is the confidence it can bring to your stakeholders. Internal auditors report to the highest management of the organization on significant risks that they have evaluated with necessary improvements to improve the situation thus the administration and the boards can take necessary actions to ensure the company is being managed effectively on behalf of all stakeholders. 

Detection of frauds

Another important benefit of IA is it helps you uncover evidence of waste, fraud and abuse. Here you will have to be strategic of how frequent you need to do IA in each of your departments, as every department is different in nature. For example, manufacturing will need daily audits as for HR annual audits is sufficient.

Quality control

IA also play a crucial role in combining assurance and consulting. Here it helps with informing the management how effective the system, processes and procedures of the company are in keeping company goal achievement on track. And it also provides advice on room for improvements to attain better efficiency.

Good corporate governance

IA are also crucial in ensuring compliance with government laws and regulations, evaluating the internal controls such as corporate governance and accounting process.

When your internal control isn’t working as intended…

Internal controls are essential to manage business operations and to ensure the accuracy of your financial records. Yet many companies struggle with maintaining an effective internal control system. 

Top reasons for internal controls to fail

There can be many reasons for your internal controls to not to work. Here are the top 4 reasons for companies’ internal controls to fail.

01. Deliberate circumvention

Internal controls put limits for individual employees on what they can do. However, they can go around these limits through loopholes in your internal control system like by teaming up with other employees. To give you an example, your two employees can make fake cheques easily if one is allowed to enter cheques to the system and the other have clearance to print the cheques.

02. Incorrect judgement

Incorrect judgement on your employees’ character, skill set, competencies and loyalty to the company is one of the main reasons for internal control systems to fail. Here the main issue is management’s inability to assess employees’ character right and assign the right task for the right employee.

03. Failures to train employees

This is one of the most common reasons for company internal controls to fail. Lack of knowledge in their duties, limitations, the consequences if they overcome these limits, general practices on how to uphold internal controls can massively affect the internal management system negatively. 

04. Management override

Control overrides are a common practice among organizations. And it is essential for the organization to carry out operations in certain circumstances – Like in an instance where you need to approve an invoice for AED 6000 when the person responsible for approving invoices over AED 5000 is on vacation, the other person may decide to skip certain steps in the process to approve the invoice. Although in this situation, it doesn’t affect the organization severely, it certainly affects the consistency of the internal control process.

How to assess internal control to optimize the internal control process?

Assess the control environment – Evaluating employee credentials related to performing controls is one of the best steps that you can take to optimize your internal control system. Here it would be best if you made sure employees have received adequate training and education to ensure their capability to maintain an effective control system.

Investigate control activities – The effective control system can translate to easily implementable policies and procedures. Here key control activities such as performance reviews, physical controls, informational processing controls, and segregation of duties should be taken in to account. 

Examine accounting information system – Efficiency of your accounting information system affect massively to the efficiency of your internal control system. Thus, checking the operational efficiency in data entry, record generation and report generation and reviewing the speed and efficiency is essential.

Evaluate the quality – Monitoring your internal control system when it’s absolutely necessary or for an audit is not enough to maintain an effective internal control system Thus; it’s important to put processes in place to encourage the management to monitor the system continuously. 

Rethink, revise and revalidate

Risk assessments are not static processes, they must be revised and revalidated to ensure they are relevant in a changing business environment. 

Risk assessment is the core of every IA function. A comprehensive risk assessment process will identify the organization’s existing and emerging risks, and help determine how these risks are controlled and where gaps exist within the operations of the business.

If you don’t know where to start your internal auditing process, our experienced internal auditors at Crevaty is here to help you. Get in touch with us today for more details.

Cloud Accounting – The best way to future-proof your business accounting

Every industry changes with time- so is accounting. It is a widely-held opinion among the world’s leading accounting commentators that the future of accounting is online. Today accounting sector is evolving vigorously than ever before- specially due to the advancement in technology and internet. Since we all are well aware of the state of the accounting sector at present, let’s have a look at how the future of accounting is going to be like with cloud accounting.  Among other cloud solutions, Xero is our best recommendation. Let us look in to detail how Xero can bring the change you need.

More businesses go online

It’s evident that more and more businesses are embracing digital technology to manage their business operations. If you have buried your head in the sand about online accounting then it’s probably time you came up for air. When you are looking for a digital solution to handle your accounting you can’t go wrong with Xero as the platform enables you to digitalize your entire accounting process delivering many benefits.

Anytime anywhere access

Specially with the Covid-19 pandemic, businesses have understood the importance of giving their teams the opportunity to work location independently. Offering ultimate location independent accounting solutions with cutting edge features to enable accountants, bookkeepers and teams to collaborate, anytime anywhere, Xero will introduce an operational flexibility of next level.

People becoming time-poor every day

Every day people are getting busier thus becomes more impatience to get done everything fast. Therefore, businesses will have to find new ways to speed up their accounting processes while keeping the costs to the minimum. Using an effective accounting system like Xero will ensure fast accounting processes from generating invoices to creating reports.

Need of simplified payment process to get paid faster

Speeding up your payment process will significantly affect your cash flow. Enabling you to improve the speed of your cash flow in ways you never thought was possible before, Xero comes with features to such as instant invoice generation, online payment and quick payment reminders and more.

Consumers seek more and more cost-effective but high-performance business partners

Everyday businesses are looking for ways to achieve high performance at low costs. Xero is one of the state-of-the-art accounting platforms that enable you to do just that. Automating many of your accounting functions, the system lets you get done more work in lesser time with a smaller workforce while speeding up everything.  With unbelievable functions and features, the platform delivers you transformative accounting solutions, that redefine how you’ve been doing accounting and bookkeeping in your business.

Xero | High-efficient accounting system of the future

With over years of experience and close to two million of client base from around the globe, Xero is the future of accounting. Introducing the accounting of future, today for businesses with incredible features such as invoicing, payroll, bank connections, bank reconciliations, inventory, quotes etc. the system will handle all your accounting functions from A -Z saving you time, money, hassle and headache.

Conclusion

With advancement of the technology, evolution of business landscape and customer expectations, how you’ve been doing accounting for the last 5 years won’t work soon. When it won’t, your business has to be ready to go with the flow strengthening your business accounting processes than ever before.

As experienced accountants in U.A.E. our recommendation is to embrace the change now to future proof the accounting of your business and to save time, money and hassle. If you are interested, Crevaty is happy to guide you on how your organization can adopt to Xero. Contact us today for more information.

VAT Liability on Jointly Owned Properties – UAE

VAT on Jointly Owned Properties (JOP) / Owners Associations (OAs)

It was always debatable topic VAT on JOP in the United Arab Emirates (UAE), till the Federal Tax Authority (FTA) issued guidelines on real estate VAT, which has been covered the VAT liability of JOP/OAs in the year 2018. There are plenty of opinions from different parties still in the market on VAT liability relating to services charges. Main reason for that is there is no legal establishments in many cases for JOP/OAs in the industry. But FTA has issued clear guidelines to follow. Let’s go in to details to understand and identify practical issues facing JOP/OAs in terms of tax environment.

What are JOPs/OAs

JOPs/OAs are often established to manage and administer the common areas of a building on behalf of all of the unit owners of a building. They commonly deal with issues such as cleaning, maintenance, security, etc. and are often comprised of members who are the owners of the individual units themselves. JOP/OA is normally responsible for the procurement of services required to maintain the upkeep of the property and collects money from all the owners of individual units within the property in order to pay the expenses of contractors or to fund major refurbishment works. JOPs/OA’s are usually not-for-profit organizations or associations, but they can take many different legal forms. They are not normally incorporated legal entities, but instead they could be,

  • A legal partnership between the members.
  • An association with legal status, registered under laws concerning joint property ownership.
  • An unincorporated group or association with no legal personality/status.

In UAE due to non-availability of legal existence for many JOPs/OAs, there is an entity which help the activities of JOP/OA called Management Entity (ME). ME can be a developer or management company contracted to manage the building. Normally ME is entered in to the contracts with the third parties and take responsibility on behalf of JOP/OA.

According to the Law No. (6) Of 2019, regarding Ownership of Jointly Owned Property in the Emirate of Dubai, the Owners’ Association Management Companies have given more responsibilities to act on behalf of JOPs/OAs.

Is JOP/OA required to be registered for VAT purposes?

JOP/OA will be required to register for VAT where any of the following applies,

  • It exercises any form of control, management and administers the common areas, including dealing with issues such as maintenance, security, rule enforcement, general well-being of tenants, financial management and engagement with statutory authorities.
  • It has a legal personality distinct from its members e.g. where it is registered under laws concerning joint property ownership and is constituted as a formal partnership, etc.
  • It undertakes an economic activity.
  • It makes supplies which would be taxable supplies if the entity was registered for VAT.
  • Its taxable turnover exceeds the mandatory registration threshold.

VAT liability on JOP/OA services

The VAT liability of supplies made by JOP/OA may vary depending on the nature of the supply made by the JOP/OA.

A) Type of income generated by JOP/OA and VAT impact,

  • Service charge – Service charge is the cost of maintaining the property and includes the costs for cleaning, maintenance, security, repair jobs of the common areas in the property. If the JOP/OA has ability to register for VAT, Service charge is a taxable supply and it will be charged at 5% of standard rate of VAT.
  • Other Income – JOPs/OAs are generating several types of other income by providing different service activities to its unit owners such as car wash income, access card income, rental income from renting out roof tops, etc. which also can be considered as taxable supply and will be charged at 5% standard rate of VAT.
  • Penalty Income – Penalty charges are charged on the delay of service charge payments and it will not be considered as taxable supply and VAT will not be charged.

Practical concern – Can non resident unit owners get VAT invoice on the services charge?

Yes. Service charge is related to the real estate property situated in UAE, need to charge VAT irrespective of the unit owner residency status.  According to the Article (31)of the executive regulation to qualify as zero-rated export services, there are conditions to comply. One of them is the services are not supplied directly in connection with real estate situated in the State. The services charges always connected to the buildings situated in the UAE, irrespective of the residency status of the unit owner, VAT will apply.

B) Recoverability of Input VAT on JOP/OA

Hence, JOP/OA will be required to charge 5% VAT on service charges and if JOP/OA registered under VAT, will be allowed to recover any VAT incurred on services it purchases from third parties for the purposes of maintaining the building. All normal input tax recovery rules apply for the JOP/OA in the UAE.

Practical concern – Can JOP/OA claim invoices under the name of ME?

In some cases, tax invoice is raised by the service provider under the name of ME (Developer or JOP/OA manager) as the contracts are under the name of ME. In some scenarios service provider are not willing to change the customer details without proper legal existence of an entity in UAE. Under the normal input tax recovery rules in UAE, it is not possible to claim input tax without proper tax compliant invoice. In this case JOP/OA should ask services provider to re-issue the same invoice at the first time to correct VAT registered name of the JOP/OA with the TRN number and other details. If this is not possible, JOP/OA need to obtain recharge tax invoice from the ME to stay and comply with the tax system.

We, Crevaty can help MEs or JOPs to comply with VAT requirements in UAE as we have team of people who are daily assisting many MEs or JOPs.

For the further information please refer section 08- Real Estate VAT guide issued by FTA, 2020 April.

Dubai and Abu Dhabi Economic support to minimize the impact of COVID-19

Dubai economic stimulus package

Dubai Government launched an AED 1.5 billion economic stimulus package for the next three months to support companies and the business sector in Dubai. The package seeks to enhance liquidity and reduce the impact of the current global economic situation.

The stimulus package developed by Dubai Government includes 15 initiatives focused on the commercial sector, retail, external trade, tourism and the energy sector. The package is expected to have a direct and indirect positive impact on all other sectors as well, over the next three months.

  • Dubai Government has introduced a freeze on the 2.5% market fees levied on all facilities operating in Dubai.
  • The second initiative extends a refund of 20% on the customs fees imposed on imported products. This initiative already started with the notice of number 01 – 2020 by the Dubai Customs on 19 March 2020. Duty refund is valid for custom duty imposed on imported goods and sold locally in UAE markets, which are subject to duty rate of 5% and have been processed under import declaration during the period from 15th March to 30th June.
  • The package also includes the cancellation of the AED 50,000 bank guarantee or cash required to undertake customs clearance activity.
  • Bank guarantee or cash paid by existing customs clearance companies will be refunded.
  • Fees imposed on submitting customs documents of companies will be reduced by 90%.
  • Exemption to traditional wooden commercial vessels registered in the country from mooring service fees for arrival and departure, and direct and indirect loading fees at Dubai and Hamriyah Ports.
  • Cancellation of 25% down payment required for requesting installment-based payment of government fees for obtaining and renewing licenses.
  • Permission to renew commercial licenses without mandatory renewal of lease contracts.
  • Reduction of municipality fees imposed on sales at hotels from 7% to 3.5%.
  • Exemption from fees charged on companies for postponement and cancellation of tourism and sports events scheduled for 2020.
  • Freeze on the fees for classification/rating of hotels.
  • Freeze on the fees charged for the sale of tickets, issuance of permits and other government fees related to entertainment and business events.
  • Reduction in water and electricity bills by 10%.
  • Reduction in deposits paid for water and electricity connections by 10%.

You can refer Dubai Customs initiatives on the above through below link.  https://www.dubaicustoms.gov.ae/en/PoliciesAndNotices/Notices/CN1_2020.pdf

Dubai Free Zones economic stimulus package

Dubai Free Zones Council announced an economic stimulus package to complement the Dubai Government’s efforts to overcome the COVID-19 situation. The economic stimulus package, in coordination with the Dubai Free Zones Council, include: Dubai Silicon Oasis Authority, Dubai Airport Free Zone Authority, Jebel Ali Free Zone, Dubai World Trade Centre, Dubai International Financial Centre, Dubai Development Authority, Dubai South, Meydan City Corporation, and Dubai Multi Commodities Centre.

Dubai Free Zones Council’s package contributes to strengthening and supporting Dubai’s businesses by reducing the impact of the spread of COVID-19 on the economic situation. It includes five key elements. They are:

  • Postponing rent payments by a period of 6 months.
  • Facilitating installments for payments.
  • Refunding security deposits and guarantees.
  • Cancelling fines for both companies and individuals.
  • Permitting temporary contracts that allow the free movement of labour between companies operating in the free zones to continue for the rest of the year.

Further, DIFC proposes implementing five initiatives over the next three months, which centre on enhancing its efforts to support companies during these exceptional circumstances. Initiatives include,

  • Waiving annual license fees for new companies during the next three months.
  • 10% discount on renewal fees for existing licenses during the same period.
  • Companies will enjoy additional facilities, such as the postponing of payment plans for all commercial properties owned by DIFC Investments for a period of 6 months.
  • DIFC will reduce its ownership transfer fees from 5% to 4% for any property sale that occurs within the period from April to June.


Related linksDubai Free Zones Council launches economic stimulus package 

Abu Dhabi economic stimulus package

Abu Dhabi is providing a dynamic economic stimulus package to support economic activity, reduce the costs of living, facilitate business in the emirate and protect the UAE’s economic stability.

The economic stimulus package includes the following initiatives:

  • Continuing with all approved capital expenditure and development projects in the emirate, as well as with further measures to preserve Abu Dhabi’s economic gains, prioritising startups and SMEs.
  • Formulating plans to stimulate strategic investment sectors and to form a new committee headed by Department of Finance, with members from Department of Economic Development and local banks to review lending options to support local companies.
  • Developing investment laws and regulations and ensuring their flexibility to maintain Abu Dhabi’s progressive economic development.
  • Allocating AED 5 billion for water and electricity subsidies for citizens and the commercial and industrial sectors, with an intention to reduce the cost of living and support businesses, as well as subsidising electricity connection fees for startups until the end of the year 2020.
  • Allocating AED 3 billion to the SME Credit Guarantee Scheme managed by Abu Dhabi Investment Office (ADIO) to stimulate the ability of SMEs to navigate the current market environment.
  • Allocating AED 1 billion to financial markets to establish a market maker fund, to enhance liquidity and sustain balance between supply and demand for stock.
  • Exempting all commercial and industrial activities from property registration (Tawtheeq) fees levied by the municipality.
  • Exempting individual and commercial real estate registration fees for this year.
  • Suspending bid bonds and exempting startups from performance guarantees for projects up to AED 50 million.
  • Not charging annual vehicle registration fees for commercial vehicles and not levying traffic toll for all vehicles.
  • Offering up to 20% rebate on the rental value of the restaurant, tourism and entertainment sectors.
  • Suspending tourism and municipality fees for the tourism and entertainment sectors for this year.
  • Settling all approved government payables and invoices within 15 working days.
  • Waiving all current commercial and industrial penalties.
  • Reducing industrial land leasing fees by 25% for new contracts.

Other references and related news articles

Promising SME’s funding avenues in UAE.

Operating a SME can be stressful with the pressure of an economic downturn. The outbreak of the coronavirus has slowed the global economy and most companies are in a state of flux. As this epidemic evolved to a pandemic, it is projected that this ordeal may last for considerable period. In the face of this uncertainty, many Small Medium Enterprises (SME’s) are already struggling to maintain their financial stability. What relief is available for these companies?

Funds, although money cannot fix all the problems in your business, having enough funds can help you with your business stability and growth.

Thus, we put together a list of SME funding avenues in the UAE to help entrepreneurs make their venture a success.

Private funding

Your family, relatives and friends are always a good way to find funds for your businesses. You can ask for someone close in your life to loan some money or get them to join your idea by offering shares of your business. This is the commonly happening funding avenue for most SMEs all over the world. In this method, less complex and easy to access is the key. As many SMEs not able to comply with requirements to have funding form outside parties.

But with this, there is always the risk of ruining your relationship with your friends or family members if your business plan goes sideways.

Crowd funding 

This is one of the best ways to attract private investors to fund your business idea. You need to pass-through screening process of your business by the platform providers to eligible to your business to attract investors. This method is very popular among new generation as it involves digitally present your business idea or business to many investors strongly. In many cases platform facilitate in digitally to meet inventors and business owners. You will have to have strong social media campaigns to promote your business idea to generate interest. There are many crowd funding platforms you can use for this. Some of the UAE Crowd funding entities with web address are mention below for your easy reference.

Government support

The UAE government also offer several funding schemes for small businesses. UAE has identified SME sector as the key to economic development, and taken many initiatives to facilitate SME business owners. In particular UAE is welcoming new innovations and invest more on technology over the past years. There are many funds allocated to help SMEs and some of them are named below for your reference.

  • Khalifa Fund
  • Mohammed Bin Rashid Fund for SME

These funds often take interest in a project that helps the local economy such as projects in agriculture, Technology, fishing, farming and home-based businesses.

Venture capital and angel investors

Venture capital and angel investors invest in businesses in exchange for equity. Such investors are often experienced entrepreneurs thus will only be interested in business ideas that have long term expansion potential. You need to exchange your business ownership to third party and they will also will involve in the management of the business functions. You are capable of getting more structured entity with these types of investments. Further, you need to have proper business setup with all compliance as the venture capital will evaluate your business or idea covering all the aspects of your business.

When you are approaching a venture capitalist or an angel investor it’s important that you perfect your pitch and learn your numbers well.

Asset financing

Asset financing is short term loan use to finance tangible or movable assets. This includes vehicles, equipment, storeroom or machinery required for the day to day activities of your business. This is one of the popular funding avenues among SME’s in UAE over the past years, to fund the assets they needed for their business. When you have confirmed business and need funding on the fixed assets you can look for this solution and the rate of borrowing cost also less compared to other business loan. You need to provide asset ownership as collateral to the bank. Comparatively less paperwork.

Bank loans

Although bank loans are not the easiest to obtain, you can’t discount bank loans given the stability it can offer you. Make sure you have a good credit score before you apply for a bank loan to increase your chances to get your loan passed. Normally you need to have a good record of running business activities for some minimum period and it is difficult to get funding for newly started business. Interest rate would be high compared to other methods. In some cases, you need to get help of a consultant to provide and prepare your entity information to submit loan application. In this case you need to provide audited financial statements for funding institution from bank approved auditors.

To know more about how you could fund your SME, please refer www.crevaty.com and we can guide you to keep running with your business.

How to protect your business from COVID-19 challenges.

It is a challenging time for all due to the COVID-19 pandemic. As a business owner, you have to look at things differently, as the business environment has changed significantly and most part of it is not under your control. Still there are things which you can do and which will help you to continue your business.

Disclaimer – This article, we will try to touch problems we feel going to face by the business’s owners. It is not our intention to diminish the seriousness of the situation with COVID-19, nor to morbidly capitalize on the fear. Our duty is to prepare businesses for real problems they may face and help them to overcome the problems.

1. Understand your financial position

This is very important to know your numbers as of now. This is the key to assess your ability to continue and know your problems. Unfortunately, many SME’s does not give importance to keep up to date financial records. This will lead to many uncertain situations and if you have not updated your numbers, please do so. You may need a help of a chartered accountant to present your numbers and obtain the service if you are not an expert in financial numbers.

Once you have financial reports, (Balance sheet, income statements and your cash flow statement) you will be able to understand how healthy your business is in terms of continuity. Today all big firms have issued guidelines to their staff to look into the ongoing concerned issues with other parameters to evaluate the going concern issues due to COVID-19 when concluding audits as of 31st December 2019. Hence, when preparing your financial statements as of 31st December 2019 or as of today, you need to consider and plan for the future with the economic downturn.

In this current situation, look at the working capital requirement and not for its profit. Sometimes your business record may have a good profit or revenue does not help at this time as now all businesses needs to consider how much they are strong in terms of working capital requirements to continue the business. Working capital reveals a great deal about the financial condition, or at least the short-term liquidity position of a business.

Working capital is more reliable than almost any other financial ratio or balance sheet calculation because it tells you what would remain if a company took all its short-term resources and used them to pay off all its short-term liabilities. All being equal, the more working capital a company has on hand, the less financial strain it experiences.

Working capital = Current assets – Current liabilities

If you are in a negative position, you are already in a problem and it will make further difficulties in future due to the downturn of the business activities. You need to improve the same.

If you are in a positive position, try to make it even stronger.

Let us consider what can improve your working capital position and what can you do regarding it.

a). Try to convert all your current assets to money. First thing you need to do is get the list of trade receivables and try to get the money from your trade debtors. This is challenging as all the businesses are now trying to do the same thing. At least you need to get a confirmed date that your customer will pay your outstanding invoices, so you can predict your cash flow. Second, selling your inventory and analyze your products and make a plan to sell as much as possible to genuine customers, even with good discounts at this time. It will make you better position.

b). Obtain a list of payables and make a plan to pay. If you have good working capital conditions, please pay your suppliers on time as usual and that is the best thing you can do to help business community at this difficult time. If you are not in good position, talk to them and agree on the time frame so that they can expect money in a particular time frame and you also will be able to manage till that time. In this way, you have some predictions on the time frame of money coming in and going out.

c). Look for working capital funding. You need to start early as possible as if your current working capital position is negative, and above a) and b) is not working then you need to find a way to pump money into the business for a minimum 3 months and better to have a plan for 6 months, as nobody can predict exactly how much time it will take to have a normal business environment. You need to predict your monthly working capital requirements and try to fund the gap. This includes securing bank loan, obtain credit card loan, obtain mortgage loan, selling your unwanted fixed assets and investor funding (Talk to your partners now, explain to them the current situation and expectations) is some of the options available.

2. Diversify your Service or Product Offering

Due to the COVID-19 impact, general public has to comply with health authority guidelines and instructions. This will create new opportunities to business communities to change the way that businesses are operating now. E-commerce will become more important than any other time in the history. Current conditions will create new avenues to do the business and look around your business and change the channels to meet the customers’ requirement.

Think on the requirements which are newly created by the current environment and customers’ needs and apply to your business line. Some of examples,

  • If you are a distance higher educational institute, increase your marketing.
  • If you are in operating grocery or restaurant, increase delivery services with the approval of the relevant authority.
  • If you are an advertising agency and want to help a broader customer base, offer prerecorded online training courses to help shore up your clients marketing and advertising skills.
  • If you offer low cost graphic design services,  offer a premium service for more mature businesses.
  • If you are an operational efficiency expert, offer a subscription for the tool you built and use to document processes.

Spend some time thinking about what you can do to minimize your risk by creating new revenue streams.

3. Make a plan to work from home

Work from home is actually performing in many countries and many people have a private office in their home. It only needs a computer or a laptop an internet connection for many employees. Due to the current situation of COVID-19, some managed to understand the problems, predict the situations properly and spend money on the training staff to work from home. Most of them built the setup and is currently running the show from home to a satisfactory level. Unfortunately, some of the employees are not able to access the records where they need to perform the tasks due to not having required devices. Hence planning for the same is very important and it will help you to run the operation with minimum disruption.

Before you grow a remote team, it is important to put a few things in place:

Write clearly defined policies – We Creavty, put all in places and have clearly communicated to all our staff in Sri Lanka and UAE to follow the guidelines.

Employ the best technology – When we first allowed our team to work remotely, we need to put right technology available with the team. We as a digital firm, Crevaty use below tools for the work.

  • Accounting: Xero
  • Project Management: Bitrx 24
  • Internal Communication: Skype for business / Zoom
  • Data Sharing; Western Digital my cloud

While this list might not work for everyone, it has served us very well. We no longer have to be in an office with a dedicated server for our accounting software, because we use a cloud-based accounting software. We don’t have to use emails or spreadsheets to track projects, because Bitrix 24 does it all. All of our chats are in one spot, rather than hiding in Google or other systems.

Finally, we want you all to prepare for the future with the challenges and we believe together we can overcome this current situation. We will be again with our loved families, friends and business communities as normal once this pandemic is over.

If you need any help on planning your business to face upcoming challenges, we can assist you. Please visit our website to know more about our services www.creavty.com

 

Right partner matter for Dubai SME’s to outsource

   

When you finally decide to outsource some of your operations, the next biggest question is finding the right outsourcing partner in U.A.E. It doesn’t matter whether it’s accounting and tax, customer service or marketing that you are outsourcing, it’s crucial to partner up with a reputable service that capable of getting the job done well.

Thus, let’s look at 6 things you need to be considered before hiring an outsourcing partner for your SME in U.A.E. 

Scope of work

Before anything you need to get clear on what exactly you need from your outsourcing service provider. Here you should define the scope of the work clearly before you go out there to find an outsourcing service provider.

 

Once you have a clear idea on what kind of a solution you are looking for and what type of a service you need, it will be way easier for you to select the right outsourcing partner for your business.

 

Expertise

Their expertise in the business is very important to make your outsourcing service experience a success. Thus, make sure you take a deep look into their technical expertise, skillset, technology capabilities and their experience in outsourcing. 

 

Here it’s essential to learn about their experience in outsourcing services just as learning about their technical experience for a smooth outsourcing.

 

Communication

Good communication is the key to make outsourcing works.

 

Which is why you should make sure your outsourcing partner has effective communication channels and effective communication processes to communicate with you on a regular basis. If you are outsourcing offshore, you must learn how they accommodate time differences. Normally all effective outsourcing companies run local timing and culture to provide better services to clients.

 

Today communication is so advance and it minimize geographical barriers to do business and itself will create opportunity to have best value for money.

 

Privacy and data security

Another important factor you need to consider when you are selecting your outsourcing partner is their policy on data security and confidentiality. When you are working with an outsourcing partner you will be sharing sensitive information with them. Thus, you must make sure that your service provider is willing to sign a non-disclosure agreement to ensure the privacy of your data.

 

Flexibility

 

Flexibility is another important factor that required to make your service outsourcing a success. Thus, make sure your outsourcing service provider is flexible when it comes to urgencies and support work. This is important to agree upon early especially if you are in different time zones.

 

Language barriers

It is common for U.A.E. to outsource services to companies in third world countries for cheaper rates. However, you need to make sure there won’t be any language barriers between you and the professional sourced by the outsourcing partner. Thus, make sure to ask to learn about the outsourcing partner’s professional language skills before hiring them, so you will be able to communicate effectively.

 

Outsourcing can deliver several benefits for your small business. However, you need to find the right outsourcing partner to make outsourcing a success. Thus, our advice is to keep in mind the above things and conduct research and a screening process to make sure you are hiring the right one.

 

We, Crevaty can help you to find proper partner for you to outsource your functions. Please contact us through info@crevaty.com

 

Xerocon London – 2019

“Communities for Purpose” – 2019 Xerocon London, November 12, 13 & 14

 It was truly amazing, and London played host to this most beautiful and innovative conference for cloud accounting leaders in the UK, Europe, Middle East and Africa.

The Conference was attended over 3000 accountants around the world.  We Crevaty being a certified partner of Xero had the privilege to grab the most from this awesome event and met many app development partners for our future growth.

Xero stands to help SME family around the glob. There is so much Xero has improved from the last year and Artificial Intelligence (AI), Machine learning are top the priorities among the rest.

All and all its about People, people and People…..

We, Crevaty, proud to be a part of the xero community as we started our business with the same common purpose of “create value for society” (Crevaty). Our objective is to create a technology enabled platform for our most talented local people to capitalize on the opportunities. Our business is for a bigger purpose and every single member of our team is not just doing a job, they work for the national interest and help the country earning revenue from foreign currencies.