A74) Does a Voluntary registrant need to register again when they cross the Mandatory threshhold?

Once you are registered for VAT there is no need to register a second time, even if you are now required to do so. Once registered there is no difference in the ongoing VAT compliance procedure.

The only change is that if your cumulative annual taxable sales were to drop below the mandatory registration threshold and you are considering deregistration, then you must wait for 12 months from the date you registered voluntarily. That would not be the case if you registered mandatorily, whereby you could start deregistration as soon as your taxable sales fell below the mandatory registration limit.

A73) My company was paid VAT even though we are not VAT Registered. How should I deposit this money with the FTA?

As a non-VAT registered supplier, you should have issued them a quote first of all and then a final invoice that does not include or even mention VAT. If they have added VAT to your payment on top of your invoice, you should treat this as an overpayment of your invoice and let them know. You can either repay it to them or keep it on their account for use against a future invoice.

If they have exactly paid your invoice and informed you that the amount includes VAT, or more likely issued you a receipt showing VAT, then this is again an error on their part. Read more...

A72) Do we have to issue a tax invoice before working for our clients?

VAT legislation does not allow you to raise a total invoice on the completion of a service if it spans a period of time and customers are required to make advance payments.

The Decree Law states you must account for VAT at the “date of supply”. For a service business, this is defined in the tax legislation as the earliest date the provision of services was completed or the date the payment was received or the date the tax invoice was issued.

Article 67 goes on to say that you must raise an invoice within 14 days of the date of supply. So in the case you outline above, you are required to issue your customers with a VAT invoice within 14 days of receiving the advance payment from them. Read more...

A71) I sold my business, transferred Trade Licence, should I de-register from VAT

The action required on sale of your business depends on whether it is a transfer of a “going concern” (a business that is operating and making a profit) or just the sale of selected assets and liabilities excluding the trade licence. As you have sold the whole business including the trade license, the existing VAT registration continues and should be amended so that the new owner is the authorised signatory and takes over VAT compliance going forward. Ideally you should make this change during the sale so that once the transfer is complete you have no further personal liability to the Federal Tax Authority.

A70) Is a company allowed to back charge me for VAT on rent I've paid?

VAT is payable on rental of furnished hotel apartments, in contrast to annual rent on an unfurnished property which is exempt from VAT.

Before VAT was introduced, the FTA published detailed transitional rules in Article 80 of the Decree Law and Article 70 of the Executive Regulations to give some clarity on how VAT should be handled in such circumstances, where a contract was concluded prior to the introduction of the tax on January 1, 2018 but the service covered an extended period that fell into 2018.

The base rule in Article 80 is that if the contract does not contain clauses related to tax, the amount paid shall be considered inclusive of VAT. However, article 80 also states that the supplier is liable for VAT, regardless of whether it was considered at the time. This means that the supplier must account for VAT on the amount you paid relating to 2018. Read more...

A69) Can a nail salon add tax to its advertised prices?

The Federal Tax Authority's default position is that advertised prices must include VAT. There are a couple of exceptions to this base rule which are outlined in the Executive Regulations. These are when the supply of goods or services are for export and when the customer is VAT-registered.

What this means is that VAT must always be included in the advertised pricing for all consumer businesses. The manager's comments referring to individual businesses being able to determine themselves whether their pricing is inclusive or exclusive of VAT is incorrect. Read more...

A68) Should I pay a year's VAT upfront on a new office lease?

The timing of accounting for both input and output VAT is dependent on raising or receiving a VAT invoice and is not tied to the movement of funds on the receipt or payment of invoices. Therefore, as soon as your landlord raises the invoice he will need to account for and pay over the VAT on the full invoice amount.
By asking you to pay the VAT at the start of the contract, he will have received the tax from you before he has to pay it to the Federal Tax Authority. If he were to split the gross amount, including the VAT, over six equal cheques, he would have to pay the full tax amount immediately but would receive the tax from you spread across the six cheques. This would effectively create a cash-flow disadvantage for him.

If you pay the VAT upfront against one invoice, you can also reclaim it at the start of the contract. However, if the landlord intends to issue six tax invoices, one for each of the cheques, then you should not agree to pay the VAT upfront, as he would then have collected the VAT from you before he has to pay it over, and before you can reclaim it. Read more...

A67) I shared my import code with a customer. Am I now liable for his tax?

Article 54 of the decree law states that input tax is recoverable by a taxable person where the goods and services are used or intended to be used for making taxable supplies. That’s not the case here. 

The correct VAT treatment for this transaction comes under Article 50 of the Executive Regulations, titled Imports by Unregistered Persons, as you have effectively acted as an agent for your customer. Summary clauses say where a person, who is not registered for tax imports goods, is using an agent – who acts on their behalf and who is registered for VAT – the agent is responsible for the payment of the tax as though he imported the goods himself. Read more...

A66) What are the rules when dealing with an overseas supplier?

If there was a contract between the customer and the UAE broker, or any services are provided to them by the broker or any payment is received by the broker from the customers, then the commission would be vatable at the standard rate of 5 per cent.

If the contract, provision of services and payment are only between the UAE broker and supplier, we then have to determine the place of establishment/residence of the supplier. This determines whether the commission should be standard-rated or zero-rated. Read more…

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…

A64) Can my start-up begin trading if it is not registered?

Businesses not registered for VAT, and who are importing goods for resale in the UAE, will pay the tax at the point of entry, which they cannot reclaim. They will then sell these goods to customers without adding VAT to the sales price.

You are selling to consumers unlikely to be VAT registered, so while you will have to pay input VAT on the import of these goods — which you cannot reclaim — you will not need to charge output VAT on the sale of the product.

You can start trading immediately but must ensure there is no mention of VAT on your website, pricing or customer receipts. Once you reach the mandatory registration threshold and register, you will start charging the tax to your customers making sure to update your website to reflect your prices are now inclusive of 5 per cent VAT. Read more…

A63) I have closed my company, so how do I deregister?

When you start deregistering, there are several stages to complete. The first step is to apply for deregistration on the FTA portal. You are required to submit details about why you want to deregister, including providing supporting documentation. So, for a business ceasing trading you will be asked to provide proof of cancellation of your trade licence and detailed financial records. Once the documentation has been reviewed, the FTA will set your status to preapproved and require you to submit a VAT return. After that the status becomes reviewed and you are then asked to submit yet another final VAT return. This is to ensure you do not have any final VAT transactions to report. Read more…

A62) Is my service zero-rated if my customers live outside the UAE?

The basic rule for services is covered in Article 29 of the Decree Law, which says the place of supply is the supplier's residence. You then need to consider whether your supply is covered under any of the exceptions or special circumstances included in the legislation. When providing services to overseas customers, you may fall under the rules of Article 31 which allows zero-rating of certain services.

However, to be zero-rated several conditions must be met. The services should be supplied to a recipient who does not have a place of residence in an implementing state and who is outside that state at the time the services are performed. Read more...

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...

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...

A57) Should I charge VAT to a client doing job interviews in the UAE?

The basic rule is outlined in Article 29 of the Decree Law, which states that the supply of services shall be the place of residence of the supplier. The Decree Law and Executive Regulations go on to give certain exceptions to this rule and set out the conditions under which the supply of services are considered to be an export, in which case they would be subject to 0 per cent VAT, rather than 5 per cent. Article 31 of the Executive Regulations states that the supply of services shall be zero-rated where the services are supplied to a recipient who does not have a place of residence in an implementing state and who is outside the state at the time the services are performed. Read more…

A56) Should a Tax Invoice be issued for an advance payment?

The date of supply is a very important concept in VAT legislation as it dictates in which VAT period you should account for output VAT on your sales and when your customer can reclaim input VAT on his purchases. The rules are included in Articles 25 and 26 of the Decree Law and Article 19 of the Executive Regulations. To simplify the legislation a little, the timing of accounting for VAT should be the earlier of the date of the supply of the goods or services, the date of raising the tax invoice, or the date of receipt of payment. In this case, therefore, the date of supply would be when you received the payment. Read more...

A55) Can companies claim VAT on hotel bookings?

This area of the VAT legislation is covered in the Decree Law, the Executive Regulations and also in a separate Public Clarification.

Article 54 of the Decree Law covers the criteria for input tax recovery and Article 53 of the Executive Regulations sets out specific types of expenditure where input tax cannot be recovered. This includes costs relating to entertainment, motor vehicles available for private use and goods or services provided to employees for their personal benefit. 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…

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...

A52) What is the VAT treatment for a supply made outside the UAE but the invoice is addressed to a UAE client?

To understand the relevant VAT treatment of recruitment services for candidates based overseas you need to look at Article 31 of the Executive Regulations to the Decree Law. The basic rule for the supply of services is that the “place of supply” is where the service provider is located. However, the regulations set out a number of exceptions to the rule.

As a recruiter, all of your sales transactions will either be zero-rated or standard-rated. Supplies which are exempt from VAT are specifically listed in the Decree Law and are only for certain financial services, certain residential buildings, supply of bare land and local passenger transport. Read more...

A51) Should I be charged VAT on a mobile top-up card?

The VAT treatment of these are covered under Article 40 of the Decree Law and Article 28 of the Executive Regulations. If you are purchasing a top-up card for a specified value which you can then use at a later date to obtain a number of different services from your mobile provider, this should not have VAT added at the point of purchase. You are simply exchanging cash for credit with the mobile provider and this is not a taxable supply as per the VAT legislation. VAT should be accounted for by the service provider when you use the credit and purchase specific mobile services.

Supermarkets tend to get this wrong and will often charge you VAT on the amount of the top-up purchased. You will then pay VAT again when you use the credit with the mobile provider. Read more...

A50) How to reflect a credit note against imported damaged goods in the VAT return after having reported reverse charge in an earlier return?

The FTA portal only reflects purchases and associated import VAT where goods have been processed through customs. Therefore, if your supplier sends you a credit note and there is no movement of goods through customs, it will not automatically reflect on the FTA portal. While you simply account for the credit note in the usual way, because this purchase is an import without the addition of UAE VAT you must use the reverse charge mechanism, effectively as a negative purchase. Read more…

A49) How do I charge VAT for items that are not sold yet?

Typically if the items remain unsold, the customer can return them to the supplier without payment. Customers like this arrangement because all the risk stays with the supplier. However, this type of sale creates some confusion from an accounting and VAT perspective.

Because the customer does not take legal ownership of the products until they are sold on, account for them as your stock until the final sale happens, even though they are not physically in your possession. Read more...

A48) From when do I start using the UAE Central Bank Exchange Rates?

FTA has clarified that the businesses and individuals are not required to rework their tax invoices if they were issued prior to May 17, 2018 where they used a reliable source for exchange rates instead of the UAE Central Bank exchange rate. And also the same source has been used consistently from January 1 to May 16. But the invoices issued after May 17 has to use the UAE Central Bank exchange rates.

A47) Can a company de-register from VAT without paying existing fines?

You cannot de-register from VAT without paying the fines first.

To solve this, you must submit the missed returns on the Federal Tax Authority portal immediately. Even if they are zero returns, this needs to be done to avoid further charges. I advise paying the existing fines, then completing a reconsideration form asking the FTA to waive the fines imposed.

The form can be found on the FTA website, but the form and all supporting documentation must be submitted in Arabic. To apply for reconsideration and de-registration, the FTA says you must have paid any outstanding tax and penalties first. Read more...

A46) What is the time period to claim input VAT?

The practice of suppliers only issuing VAT invoices after receiving a payment is quite a common one. It is to prevent them from having to pay output VAT before they have received payment for their invoices. This practice is not in compliance with the VAT legislation and I would caution against doing this routinely. Read more…

A45) Can VAT be claimed on company paid health insurance for employee families?

From the inception of VAT in the UAE it was somewhat unclear if employers could reclaim the tax charged on health insurance costs for employee families as well as direct employees.

In September, the Federal Tax Authority issued a very helpful guide that clarified the position. This can found on the FTA’s website https://www.tax.gov.ae under the Getting Help menu.

The VAT law mentions two circumstances where an employer is able to reclaim VAT on employee benefits. The first criteria is where there is a legal obligation to provide such benefits. Read more...

A44) Can I claim Input VAT on Goods that have been exported?

The VAT legislation allows you to reclaim input VAT you have paid to suppliers on goods and services that you then use to make taxable sales. If you make a combination of taxable and non-taxable sales, then you are obliged to restrict the amount of input VAT you reclaim in proportion to your taxable and non-taxable sales. Read more...

A43) Is VAT applicable on rent-free period?

Many landlords offer rent-free periods as an inducement for a new tenant to occupy their property. While it is called a “rent free” period, it is effectively a discount, where the price for a 15-month period is discounted to the standard 12-month price.

The law says the value of the supply may be reduced in the case of a discount if two conditions are both met: that the customer has benefited from the reduction in price, and the supplier funded the discount.  Read more...

A42) Should I charge VAT to my GCC Clients?

Depending on the service being performed, it is likely that the service will be considered as an export of services. If so, as per Article 31 of the Executive Regulations to the Decree Law, which covers export of services, stipulates that, in most cases, exported services should be taxed at the zero rate of VAT. Read more...

A41) Do I need to re-register if my company's name has changed?

What the FTA has advised in this situation is that you file an amendment to your existing registration and update the registration with the new name and trade licence.

They also require a letter on company letterhead, signed and stamped, that explains why you have changed your business name. Once approved, they will make an amendment to the VAT registration name to reflect the updated company branding. Read more...

A40) Should I deregister from VAT if in the last 12 months, 80% of my company sales are exports and the remaining 20% is below AED 187,500?

VAT legislation states that a registrant must apply for de-registration if he stops making taxable supplies or if the value of taxable supplies in the last 12 months is less than the voluntary registration threshold of Dh187,500 and you do not expect to reach this threshold in the next 30 days. There are further conditions that if you registered voluntarily, you cannot deregister until 12 months after you registered. Once you have determined that you must deregister, you must apply to do so within 20 business days, effectively one calendar month. Read more…

A39) Should I pay tax on the sale of company assets?

Legislation states that VAT is charged on taxable supplies made in the normal course of your business. Some argue that selling fixed assets, such as furniture, is outside the normal course of business and is not vatable.

The purchase of assets used to generate taxable sales are part of most businesses' normal activities. When you purchase the new office furniture you will be charged VAT on the purchase, which you can recover in full against your output VAT on taxable sales. Read more...

A38) I tried to deregister a year ago but now have Dh5,000 in fines

The rules around de-registration are a little complicated. A person registered under VAT can apply to do this in two circumstances:

First if you stop making taxable supplies and do not expect to make any over the next 12-month period. Second, if your taxable supplies or taxable expenses incurred over the last 12 consecutive months is less than the voluntary registration threshold of Dh187,500 and you do not anticipate crossing this threshold in the next 30 days.

However, if you originally voluntarily registered for VAT; you are not allowed to de-register until 12 months have passed. Also, once you have registered, you are obligated to file quarterly VAT returns regardless of your turnover. Read more...

A37) Does a Consultant need to charge VAT to an overseas client even if they cannot re-claim it?

When determining what rate of VAT you should charge, you first need to determine what is known in VAT legislation as the “Place of Supply”. The basic rule, as per Article 29 of the Decree Law, is that the place of supply of services is the supplier's residence.

This is then complicated by a number of special cases relating to the nature of the supply and customer's base. One of these special cases covers electronic services... Read more...

A36) Should companies deregister if they make less than Dh375,000?

VAT de-registration is where a registered taxable person cancels their existing VAT registration. They then no longer charge tax on their sales and cannot claim any input VAT recovery. The Federal Tax Authority legislation sets out rules for both mandatory and permissible de-registration. Read more…

A35) We charged VAT at 5 per cent to our overseas customers by mistake. How can we correct this error?

For goods, the legislation is relatively straightforward, and you need to look at Article 45 of the Decree Law and Article 30 of the Executive Regulations. Subject to certain detailed conditions being met and having what is referred to as official and commercial evidence to support the export, then the transaction should be zero-rated.

The rules surrounding the export of services are more complex. These can be found at Article 45 of the Decree Law and Article 31 of the Executive Regulations. Read more...

A34) Can I reclaim the VAT on a New Year party for my staff?

The Federal Tax Authority have issued some really useful Public Clarification guides which can be found on their website under 'getting help'. These guides give additional detail to the published legislation on certain topics. There is one entitled “Non recoverable input tax – entertainment services”. Read more...

A33) How can the local branch of a foreign company and a local company having common board of directors form a Tax Group?

Two UAE entities may be registered as part of a VAT group where the parent company is an overseas entity not part of the VAT group. Article 14 of the decree law sets out where companies may form a tax group and all three of the following conditions must be met. Firstly all entities must have a place of establishment or fixed establishment in the UAE. Secondly the companies must be considered to be related parties. Finally, one or more persons conducting business in the group controls the others. Read more…

A32) How to convert foreign currency invoices in to Dirhams?

Exchange rates between currencies are continually fluctuating which is why tax regimes have to set out clear guidance rules on how rates should be applied to taxable financial transactions. The dirham is pegged to the US Dollar and although we see some movement in the exchange rates between the two currencies, because of the peg the movements tend not to be significant. Other exchange rates may move more widely and you may see significant differences between the amount invoiced and the amount you eventually receive when you convert the funds to dirhams. Read more…

A31) What details do I need to include on a tax invoice?

VAT legislation prescribes that whenever you make a taxable supply you must issue a tax invoice. Whether you need to issue a full invoice, or a simplified version depends on whether your customer is tax registered and the invoice value. However, you have an obligation to issue and deliver an invoice in all circumstances, so your customer telling you they don’t want one is irrelevant. Read more…

A30) How do I invoice a client in another currency?

The VAT legislation does allow for registered companies to raise sales invoices in a currency other than the dirham. Article 69 of the legislation states that if the supply is in another currency, then the amount stated in the tax invoice should be converted into the dirham according to the exchange rate approved by the Central Bank at the date of supply. This is not necessarily the date of invoice or the date the payment was received. Read more...

A29) Firms in UAE's designated zones: Are all your supplies VAT-free?

The basic tenet of identifying and listing some of the free zones in the UAE as 'designated zones' under the country's's value-added tax legislation was to make them VAT free and consequently, be consistent with the tradition of keeping free zones typically free from taxes. Read more...

A28) What entertainment expenses can my company reclaim VAT on?

The legislation in this area is very general, so it was welcomed when the Federal Tax Authority recently issued detailed guidance on the subject.

Where goods or services are purchased for employees to use - at no cost for them and for their personal benefit - including the provision of entertainment, then the VAT incurred on the cost is not recoverable. There are three circumstances in which a taxable entity is entitled to recover the tax on such costs. Read more...

A27) When exactly should I register for VAT and what records do I need to keep?

Do not wait until your turnover has reached Dh375,000 before registering for VAT. The law says you need to look back over the previous 11 months and forward for the next month, obviously using anticipated turnover for the future month. If this total exceeds the registration threshold you should register. Read more...

A26) Do I have to pay VAT if I cut my tenancy contract short? 

VAT is a tax on supplies of goods and services. Therefore, no VAT is due if no supply takes place. As part of business arrangements, businesses will often make payments to compensate each other for any loss, omissions or other wrongdoings. A question arises whether VAT is due on such payments. Read more...

A25) When claiming input tax paid on goods bought before registration, is it necessary to hold goods after registration to claim that tax?

The law that covers when you can reclaim input tax paid prior to VAT registration is covered in Article 56 of the Decree Law. It says that you may recover VAT paid on goods and services, or paid on the import of goods charged in the previous five years, provided that these goods or services were used to make supplies that give the right to input tax recovery upon registration. Read more…

A24) What does 'Submit Voluntary Disclosure' mean on my tax return?

The law says that if a taxable person becomes aware that a return submitted to the Federal Tax Authority is incorrect, resulting in a calculation of the payable tax being less than required by more than Dh10,000, they can make a voluntary disclosure to the authority within 20 business days once they become aware of the error. Read more...

A23) Paying VAT on commercial property

Since the implementation of the value-added tax (VAT) in January, there have been numerous discussions explaining its effects on real estate. Commercial property transactions, both leases and purchases, are not exempt from VAT and both tenants and purchasers are obliged to pay VAT on either the rent or the purchase price.  Read more...

A22) How do you claim Input VAT for a real estate business having a two company setup, one for property management

that receives Output VAT and another for general maintenance that pays Input VAT?

In this kind of arrangement, you would usually expect the maintenance company to invoice the property company for its services in maintaining the properties. Assuming the two companies are not covered by a tax grouping this would generate taxable revenues in the maintenance company against which you would offset the input VAT charged by suppliers. Read more…

A21) FTA Clarifies the VAT Treatment of Compensation Payments

The Federal Tax Authority (FTA) has recently published a clarification on VAT treatment of compensation type payments, such as payments to settle disputes, and other contractually agreed compensation. Where a payment or fee is not a consideration for a supply, there is no VAT due. Often times, there are penalty clauses or liquidated damages clauses in a contractual agreement between two parties, and when triggered, it is unclear whether this is considered as a supply for VAT purposes. 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. Read more…

A19) Firms, individuals have to use exchange rates on the date of supply for VAT

All those UAE companies and individuals who raise tax invoices in a currency other than the UAE dirham will have to use the exchange rates approved by the Central Bank as on the date of supply.

"In this regard, the Central Bank of the UAE has recently made available facility to access exchange rates against UAE dirham for VAT related obligations in its website. With this, businesses need to ensure that due VAT has been accounted as per the applicable exchange rate notified by the Central Bank are followed. In the event of failure to comply with the aforesaid, it may entail penal consequences related to maintenance of required records as per the Tax Law, failure to account due tax on imports etc.,"  Read more...

 

A18) Should VAT be charged on director fees?

The FTA issued a guide in April on this specific topic. Firstly, consider how much you receive in total from your directorships fees. If your fees exceed the mandatory registration threshold of Dh375,000 per annum, then you are obliged to register for VAT and then charge the tax on your services. You should not charge VAT if you are not registered, although you will be required to account for the tax if you should have registered and have not yet done so. Read more…

A17) How to report an error in a previously filed VAT return?

The rules covering reporting tax return errors to the FTA are covered in Article 8 of Executive Regulation of Federal Law No. (7) of 2017 on Tax Procedures. Read more...

A16) Can a restaurant charge VAT after a two-for-one voucher has been used?

Article 40 of the VAT law and Article 28 of the Executive Regulations cover discounts and vouchers. It says in the case of a discount, the value of supply, which is the amount on which you pay VAT, may be reduced if the customer has benefited from the reduction in price and the supplier funded the discount. The value of a discount is the amount by which the price paid is reduced.

Article 40 defines a voucher as any instrument that gives the right to receive goods against a stated value, including the right to receive a discount on the price of the goods. Read more...

A15) What if the difference in VAT tax amount is less than AED 10,000?

If a taxable person makes an error or omission or a wrong treatment of tax by which the output tax payable or input tax recoverable is less than AED 10,000 for a particular tax period, then they DONOT need to use the VAT Voluntary Disclosure Form 211. The Taxpayer can rectify such errors or omissions in the subsequent VAT Return without a separate disclosure.

A14) Can we claim input VAT for pre-operation expenses?

Article 56 of the Decree Law sets out when you can reclaim input VAT paid before tax registration. It allows input tax to be reclaimed “provided that goods and services were used to make supplies that give the right to input tax recovery upon tax registration”. Read more…

A13) Should displayed prices be including or excluding VAT?

Website providers will usually charge you a fee for using their sales platform, which is typically as a percentage of the sales you generate through their site. They will pay you the net amount of the revenue after deducting any credit card charges and their agreed fees. You need to account for the costs and revenues separately on your VAT return and show the input and output tax in the correct return fields. Read more…

A12) Whether all free zones are Designated Zones for VAT

As per Article 51 of the Executive Regulations on VAT, Designated Zone (DZ) for VAT purposes shall be treated as outside the state and outside the implementing states. In this regard, as per Cabinet Decision No. 59, out of the 45 free zones in the UAE, 20 DZ (including JAFZA North and South) are notified for VAT purposes. 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...

A10) Does an entity need to deliver a Tax Invoice to its customers?

Article 59 section 8 of the Executive Regulations to the Decree Law contains information about issuing tax invoices, including what details need to be included and how they should be issued. It states that tax invoices may be issued by electronic means provided two conditions are met. Read more...

A9) What do I need to include on my VAT return?

I’m due to complete my first VAT return for the quarter ending March 31. What information do I need to report in the return and where can I find guidance? Read more...

A8) How should Tax Invoices be issued and numbered?

Article 59, 1(d) of the Executive Regulations to the Decree Law says that all tax invoices should have either a sequential number or another unique numbering system so that each tax Invoice can be identified and the position of each invoice in the sequence of all invoices can be determined. Read more…

A7) Can an overseas company charge my business UAE VAT?

Businesses that do not have a permanent presence and are not resident in the UAE, but make sales here, are still obligated to register for and charge UAE VAT. So it is correct that invoices, say from a US or UK company are charging you UAE VAT if their systems can determine you are resident here. I expect to see more and more overseas companies registering for UAE VAT and this will become the norm. Just ensure that the invoice shows a UAE TRN number so that you will be able to reclaim the tax charged.  Read more...

A6) Should I bother registering my small business for VAT?

Can you explain the pros and cons of voluntary VAT registration? I have a small design business selling to both businesses and consumers mostly based in the UAE. My turnover is around Dh200,000 per year and I’m confused as to why I would want to register for VAT before I’m obliged to do so.  Read more...

A5) Should VAT be charged on disbursements and reimbursements?

It’s quite a complicated issue from a VAT perspective where a third party is making payments on your behalf. Assuming they are VAT registered, the 5 per cent VAT on their fees is correct.

For the licensing body fees and out of pocket expenses you need to determine if these are classified as disbursements or recharged expenses. These two are treated very differently from a VAT charging perspective. Read more…

A4) Can I invoice my UAE customers in US dollars rather than dirhams?

I run a B2B marketing consultancy and have always invoiced my UAE customers in US dollars rather than dirhams. Is this allowed under the new VAT laws and what details exactly should my invoices include? Read more...

A3) How can non-registered firms import goods?

The Federal Tax Authority (FTA) has clarified import procedures for non-registered businesses adopting the e-Dirham system for payments and e-Guarantee to provide guarantees to ease processes for non-registered importers.

Non-registered businesses wishing to import are required to follow standard customs procedures and pay VAT in one of the following methods... Read more...

A2) Are proper tax invoices critical?

Suppliers of taxable items are required to issue proper tax invoices to customers on amount collected as tax. According to the Federal Tax law, any person who receives an amount on issuing a bill following a supply must pay this amount to the tax authority within the specified time.

A tax registrant shall issue a tax invoice within 14 days of the date of supply. The UAE tax law and the Executive Regulations on the law specify information to be included in the tax invoice; conditions and procedures required to issue an electronic tax invoice; instances where the registrant is not required to issue a tax invoice to the recipient of goods or services; instances where other documents may be issued in place of the tax invoice. Read more...

 

A1) Is it mandatory for all businesses to maintain tax records?

Under the Federal Tax Law, all businesses in the UAE will need to record their financial transactions and ensure that their financial records are accurate and up to date.

The law requires any person conducting any type of business to keep accounting records and commercial books, as well as any tax-related information as determined by the law. Tax returns, data, information, records and documents must be submitted to the Authority in Arabic. The Federal Tax Authority (FTA) may, however, accept documents in any other language, as long as the person provides a translated copy into Arabic at their expense and responsibility if so requested.

Any person under the tax law, required to register for taxation must do so, as stipulated by the law. Registrants must include their Tax Registration Number (TRN), in all correspondence and transactions with the Authority or with others. They must also inform the FTA by filling the form of any circumstance that might require the amendment of information related to their tax record within 20 working days of the occurrence of said circumstance. Read more...