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Tax Consultants & Bookkeepers in the UAE

        

VAT FAQ's

Expert VAT Opinions

C19) How a company can claim a refund on excess VAT

When a company files its tax returns, it is required to list the details of sales, purchases output VAT, and input VAT paid over the past three months.

The output VAT is the amount of tax collected on the company’s sales, and the input VAT is the amount paid to the supplier towards purchases and expenses.

If the output VAT is less than the input VAT, the excess balance will be deemed VAT refundable.

So how does a company go about getting its VAT refunded? The taxpayer has two options, according to tax software business Tally. Firstly, the taxpayer is eligible to request a VAT refund. Read more...

A20) Do you have to use the Central Bank’s exchange rate for VAT invoices?

Article 69 of the VAT Decree Law states that if the supply is in a currency other than the UAE dirham, then the amount stated in the tax invoice shall be converted into dirhams according to the exchange rate approved by the Central Bank at the date of supply.

The Executive Regulations say that for each good or service you must show the following on the invoice: the unit price, the quantity or volume supplied, the rate of tax and the amount payable expressed in AED. Read more…

B36) Can I take on new orders without a TRN?

Once you have submitted your voluntary tax application on the FTA’s online portal you have to wait until they have reviewed the uploaded information and the registration is accepted before you can submit invoices with VAT included.

Until that point, raise invoices that do not mention the words VAT or TAX and do not add VAT to the amount invoiced. Including VAT in the invoice is against the Decree Law and would result in fines and penalties if later identified during an FTA audit. Read more...

A11) My Start-up now qualifies for VAT. Can we reclaim any tax paid before registration?

Article 56 of the Decree Law allows the recovery of input tax paid on goods, services and imported goods prior to the date of VAT registration, “provided that these goods and services were used to make supplies that give the right to input tax recovery upon tax registration”. Input VAT is the VAT you are charged by your suppliers on goods and services purchased. This means that you can only recover VAT paid before registration if VAT charged on the same goods and services post registration would be recoverable. Read more...

B27) As a start-up not paying VAT, how can I retain my big clients?

Businesses whose turnover falls below the mandatory VAT threshold of Dh375,000 per year are not required to register for VAT. Not being VAT registered does not make a properly licensed business any less legal or valid than a similar business who is VAT registered. A start-up will always inevitably have a period where they are not VAT registered. There seems to be a misconception within large company finance teams that they cannot do business with any supplier that isn’t VAT registered. The Federal Tax Authority (FTA) has said that a business should not deal with another business who they believe should be VAT registered and is not. But there is an obvious difference between a company not being registered when they should be and a start-up or small business not being VAT registered because they are not eligible to be. Read more...

FTA VAT FAQ's

No VAT on donations, grants, sponsorships in some cases: FTA

The Federal Tax Authority, FTA, has clarified that donations, grants and sponsorships are outside the scope of Value Added Tax, VAT, only when no benefit is received in return.

Any benefit in return for such payments will be subject to VAT, the authority said. Read more...

FTA clarifies VAT on healthcare of employees' families

The Federal Tax Authority issued a clarification on insurance that states that an employer would only be able to claim the input VAT on the health insurance provided to employees' families if it is the legal obligation of the employer to provide the insurance.

Pratik Shah, partner at Dhruva Advisors, said there is no legal obligation in Dubai on the employer to provide health insurance to the family of an employee, whereas Abu Dhabi mandates employers to provide such extended benefits. Read more...

Compensation payments are not subject to VAT, the Federal Tax Authority says

Companies and consumers in the UAE will not be taxed on payments listed in their business and legal contracts, such as a speeding ticket or a late-delivery fine, unless these payments are related to the supply of goods and services, according to the Federal Tax Authority. Read more...

FTA clarifies VAT for independent director fees

The Federal Tax Authority (FTA) has confirmed that the date of supply for value-added tax (VAT) with regard to independent directors' services is determined either in accordance with the general rules or the special rules, depending mainly on whether the fees for the said directors were known from the outset or not. Read more...

Profit margin scheme applies only to goods already subjected to VAT: FTA

The Federal Tax Authority (FTA) has reaffirmed on Monday that the profit margin scheme - which allows a taxable person to calculate value added tax on eligible supplies on the basis of the profit margin earned instead of the original selling price - cannot be used in cases where VAT was not earlier charged.

Such instances include if the goods were purchased by the taxable person prior to the implementation of VAT, or if stock in hand was also acquired prior to January 1 2018, the FTA clarified. Read more...

Excise FAQ's

What is tax?

It is a monetary contribution imposed by a government on individuals and organizations to raise revenue to pay for public services.

What is Excise Tax?

It is a tax on specified goods that are intended for consumption in the UAE. Tax is due when goods enter free circulation in the UAE. It is not a transaction-based tax, which means that goods do not need to be sold for the tax to be due.

What is the effective date of Excise Tax in the UAE?

Federal Decree-Law No. (7) of 2017 on Excise Tax was issued on 17th August, 2017 and is effective from 1st October, 2017.

Which goods are subject to excise tax in the UAE?

  • Carbonated drinks – 50%
  • Energy drinks – 100%
  • Tobacco – 100%

On which value will excise tax apply to?

Excise tax will be applied to the retail selling price of specified goods at the applicable rates.

What are the details of retail selling price issued?

You can find a list here.

Who is required to register for excise tax?

Producers, Importers, Stock pilers and Warehouse keepers of Excisable goods.

What should businesses required to pay excise tax do?

Register with the FTA, submit monthly excise tax returns and pay the excise tax due on the same date as submitting the tax return.

When is excise tax due?

Excise tax is due when goods enter free circulation in the UAE.

Will excise tax be payable by travellers entering the UAE?

Travellers will not need to pay excise tax on goods if the value of goods is below the Custom Duty exemption threshold. Where the value of excise goods exceeds the exemption threshold, then excise tax will be due on the total value of goods.

Will refunds of excise tax be available?

Excise tax is paid once in the supply chain and a refund will be available under limited circumstances.

Can payment of excise tax be delayed until the goods are sold?

Since excise is due at the point the goods are released for consumption in the UAE, payment of excise tax cannot be delayed till goods are sold.

Will excise tax apply to goods released for consumption in a free-zone?

Yes, including a free-zone that is registered as a designated zone.

Will samples be subject to excise tax?

Regardless of whether or not they are intended for sale, excisable goods will be subject to excise tax.

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