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Tax Consultants & Bookkeepers in the UAE

        

VAT FAQ's

Expert VAT Opinions

A61) Can VAT fines be waived if the company sales are below Registration threshold?

When VAT registration opened in December 2017, many small business owners thought they had to apply regardless of the size of their business. Others wanted to register, despite knowing they were under the mandatory or even voluntary registration thresholds, often fuelled by larger companies not wanting to deal with non-VAT registered businesses.

The FTA was inundated with initial registrations and many companies below the voluntary threshold were registered. The FTA has since introduced more robust checks to reject small businesses that don’t meet the turnover thresholds. Read more...

A60) By mistake I did not add VAT to some sales invoices in my last return. What should I do?

As long as the omission resulted in underpaid VAT of less than Dh10,000, you can just include the invoices in your next return, effectively catching up on your payable tax. You can only do this if your missed invoices total less than Dh210,000.

If the missed invoices total more than this amount, then you need to submit a voluntary disclosure to the FTA and pay the under reported VAT separately from the usual return process. Read more...

C24) Our UAE based company is selling services to customers in Bahrain and KSA. How should we account for VAT on these Invoices?

The GCC member states of the UAE, Bahrain, Saudi Arabia, Oman, Qatar and Kuwait have signed a common VAT agreement. Article 9 of this agreement set out how taxation on sales between these member states should be treated. It says that if a taxable person in a member state receives taxable goods or services from a resident in another member state, then he shall be deemed to have supplied these goods or services to himself and the supply is taxable in accordance with the Reverse Charge Mechanism (RCM). Read more…

A59) What is the correct VAT treatment for medical insurance premium?

If you were based in Abu Dhabi, where there is a legal requirement to provide medical insurance to employees and their dependants, you would be able to reclaim all the input VAT on both employees' and dependants' premiums. In Dubai, because there is no legal requirement to provide health insurance to dependants, it is not a business expense and is therefore not recoverable. This would be the case even if the employee's contract includes that the employer will provide it and pay for it. Read more...

A58) Do I need to change to an FTA accredited accounting system that produces FAF?

An FAF (FTA audit file) is a specific file format that the FTA would request if you were subject to a VAT audit. This file can be recreated in excel from your accounting records, so as long as you can extract all the relevant data from your current accounting system, which you would use to prepare the FAF, you do not need to have a system that produces the FAF directly. 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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