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Tax Consultants & Bookkeepers in the UAE

        

VAT FAQ's

Expert VAT Opinions

A65) When should a Voluntary Disclosure be submitted?

The Federal Tax Authority issued a specific Voluntary Disclosure User Guide and that offers two scenarios where a voluntary disclosure (VD) must be submitted and two where it may be submitted. You must submit a VD for a filed tax return if the calculation of payable tax is less than it should have been by Dh10,000 or more. For amounts less than this, you do not need to submit a VD and can just correct the error in the next return. However, if you have deregistered and will not be making another return, you must file a VD regardless of the amount of underpaid VAT. Read more…

A54) What exchange rate should you use to convert a foreign currency credit note to Dirhams?

If you receive purchase invoices in a currency other than dirhams, you are required to use the exchange rates issued daily by the Central Bank to convert the transactions. The exchange rate you use must correspond to the date of supply. In currencies other than the US dollar this usually means that, due to currency fluctuations over time, the amount you pay won't exactly match the dirham liability you recorded at the time the invoice was received. Read more…

B41) Can I avoid a Dh22,000 penalty imposed by the FTA?

A lot of people have made the same mistake in calculating and paying their VAT but failing to file the corresponding VAT return on the FTA online portal. Unfortunately, if you fail to file the return the FTA does not recognise any payments that you have made. Therefore you get fined not only a later filing fee but also interest on the amount of the tax due, until the point at which you file the return. The penalty for missing the filing deadline is Dh1,000 for the first offence and then Dh2,000 for every subsequent missed deadline. Read more…

A53) What is the penalty for not submitting a tax return on time?

The Federal Tax Authority always gives businesses a minimum of 28 days after the end of the reporting quarter to prepare and file their VAT return. When the 28th of the following month falls on either a Friday or Saturday, the deadline moves to the next working day. Any VAT returns not filed by the given deadline should be submitted as soon as possible afterwards. The FTA portal will allow you to file a return for a quarter after the deadline has passed. In fact you cannot file another VAT return until you have filed the previous one, so it forces you to file returns sequentially, even if you have missed a deadline. Read more...

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...

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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