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Tax Consultants & Bookkeepers in the UAE

        

VAT FAQ's

Expert VAT Opinions

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.

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

All companies with an annual turnover greater than Dh375,000 must mandatorily register and account for VAT, while businesses with an annual turnover of between Dh187,500 and Dh375,000 can voluntarily register.

One of the major downsides to registering is the cost of compliance. All companies, whether VAT registered or not, should already be keeping proper accounting records. If you choose to register for VAT, it’s likely you will need to employ specialist help to assist with your VAT set up and ongoing compliance. The VAT legislation is complex and penalties for getting it wrong are onerous. For small businesses the additional cost of compliance will eat into their profits. 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...

B48) Can a company offering a service reclaim VAT charged on bank fees?

The simple answer to your question is yes, a company can reclaim VAT on all business expenses, and bank charges fall into this definition. There are a few exemptions, such as entertaining and certain employee benefits, but bank charges are not specifically excluded.

There are, however, a number of conditions to note here. The bank account imposing the charges must be in the name of the VAT-registered company. If you are using another bank account, which is not in your company's name, such as a personal account, as many small businesses do, this would not be considered a business expense and any VAT on that bank’s charges cannot be reclaimed. Read more...

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...

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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