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Frequently Asked Questions

Frequently Asked Questions (FAQs)

What is the deadline for VAT Return filing and payment, is the dates are different for payment and Return?
A) The deadlines for VAT Return filing and payment are defined in the Tax Registration Certificate and these are either monthly or quarterly based upon the conditions by FTA.
The due date for VAT Return and payment is 28th day after the tax period closing (monthly or quarterly). There is no different dates for Return and payment.

How to remit VAT amount collected to Govt.?
A) There are various method available to make the payment to FTA they are:

    Online Bank transfer
    Payment to bank teller or exchange house teller
    E Dirham card
    Credit Card

Do we need to keep mandatory books of accounts for VAT?
A)Yes there are certain set of documents to be kept by all registered persons for VAT, as per the guideline issued by FTA. Certain set of documents should be kept for a period ranging from 5-15 years.

Whether we are eligible to claim all Input VAT incurred in UAE?
A) Yes, input VAT incurred in UAE are eligible to claim and adjust against the output VAT, except on those specific cases announced by FTA. Most of the input VAT is eligible to claim if this is not personal, entertainment or leisure or anything not related to the business.

What are the consequences for non registration for VAT or delayed registration?
A)Failure to register is an offence and FTA will charge penalty for non-registration, if the registration threshold conditions are met. On all registration applications, FTA is issuing the Tax numbers unless, the application is not complete or wrong information is uploaded or FTA require some amendments or additional information..
Other consequences not registered, we cannot claim any input VAT incurred and eventually the cost of operations will go up. Also, the person need to pay all the tax amount due on the supplies he had made during such delay in application of registration.

What are the services in UAE which is not subject to VAT?
A) All goods and services except below are subject to VAT:These are called exempted goods and service.

    Public passenger transport like metro, public buses, taxi etc.
    Residential rent and lease.
    Certain financial service.

Apart from exempted there are goods and services which are zero rate.

    Export of goods or services
    International transport of passengers and goods
    Investment precious metals
    Means of transport
    The first supply of a newly constructed
    Educational services
    Healthcare services

Whether an individual or a non registered person can claim any input VAT incurred?
A) No, only the registered persons are eligible to charge VAT from customers and such non registered persons cannot claim any input VAT.
Most of the individual transactions are in the nature of end user and as such we may not be able to register in the capacity of an individual. If we do business transactions in the economic terms, then we need to register and collect VAT

Residential rents are VATable or is exempt?
A) No, residential lease or rentals or sales are exempt and is not subject to VAT.. However, if the residential building is in the nature of services apartment and subject to certain conditions shall be taxable at 5%. Similarly, all commercial leasing/sale/rent are subject to VAT, subject to the terms and conditions prescribed by the FTA.

Any specific provisions applicable on Free Zone companies?
A) FTA has announced a  list of Designated zones in UAE, and only those who are announced as Designated Zones shall follow special provisions as published by FTA. Designated zone has special treatment for supply of goods. (e.g. supply of goods with in designated zone shall be treated as out of scope and no VAT is applicable. But services supplied by designated zone companies are in the same line as mainland company and shall follow the same rules as applicable for mainland company i.e. normally taxed at 5% unless exempt or zero rated.

A UAE registered tax payer has a project in Lebanon. He buys goods from Canada and these are delivered directly from Canada to Libya. How should this transaction be shown on the VAT return?
A) This transaction is out of scope of UAE VAT as the goods are not touching UAE soil. This transaction will not be included on the VAT return because it is out of scope of UAE VAT. It is advisable that the local tax payer maintains documents to prove that the delivery of the goods was in the foreign country. These documents could be customs declaration documents issued by the receiving country, transportation documents from the supplier to the foreign country.

Scenario
• One Customer, say X LLC, based in Dubai, has placed Purchase order of Bed sheets to Z LLC, Dubai (main land company).
• Bed sheets will be manufactured by A Ltd. in India, which is Parent company of Z LLC.
• As agreed terms, Customer will pick up shipment from A Ltd. India on Ex-works basis.
• Therefore, Customer will clear shipment in India as well as in Dubai Customs.
• Finally, Z LLC will raise Tax invoice to Customer as per PO price.
Is Z LLC need to charge VAT when they Invoice to Customer as per UAE VAT rules and regulations?

A) As per article 11 of GGC VAT agreement, “The place of a Supply of Goods that occurs with transportation or dispatch thereof by the Supplier or to the account of Customer shall be the place where the Goods are located when the transportation or dispatch commences.” Hence in this instance Point of Sale of goods is outside the state as the transportation begin from outside UAE. Therefore, it will be outside the scope of UAE VAT and UAE VAT cannot be levied. The client should NOT raise the tax invoice, instead commercial invoice should be used.

Errors in Emirates wise reporting in the tax return submitted, whether the Taxable person should submit a Voluntary disclosure for the said tax return?
A) As per the Executive regulation of Tax procedure, Voluntary disclosure need to be made in respect of incorrect tax return submitted. Where the result of such error has led to tax payable amount disclosed short by AED 10,000 or more. In this case where emirates wise reporting is wrongly reported, there is no short report and short payment of tax hence this can be adjusted in next due tax return.

When can we claim input for this (assuming monthly returns)
a. Invoice received in Feb but not accounted due to approval till June. Does it have to be claimed in June when its accounted or in Feb when we received the invoice?
b. Supplier delivered the Goods in January, but invoice was received only in June by the customer, in which tax return the input can be claimed.

A) For a. above: invoice was received by the customer in Feb hence the input can be claimed in the tax return of Feb. the reason being the invoice is received and due to internal issues the claim was made. In case of such omission the taxable person should claim maximum by March return else the input gets time barred.

For b. above: As per the used guide issued by FTA (Taxable-Person-Guide-Issue-1-March-2018) If the taxable person has not received the tax invoice or other acceptable documentation in the tax period when the supply was made, they may deduct the input tax in the tax period in which the tax invoice or the alternative documents are received. Hence in this case the taxable person can claim the input in the tax return for June.

Van purchased by company specifically for delivery purpose. there are no seats in the back of the car and company has strict policy of keeping the car in office building after office hours (no personal use and there are documentary evidence supporting the use of Van). Claim of VAT is allowable? Purchase invoice (tax invoice), Van registration is in the name of the company.
A) Disallowance of input is applicable only in case a car which can be used for personal purpose as well. In this case the VAN is designed for business purpose and use is restricted for business use only. Hence the tax paid to the supplier of VAN can be claimed.

Scenario
• One Customer, say X LLC, based in Dubai, has placed Purchase order of Bed sheets to Z LLC, Dubai (main land company).
• Bed sheets will be manufactured by A Ltd. in India, which is Parent company of Z LLC.
• As agreed terms, Customer will pick up shipment from A Ltd. India on Ex-works basis.
• Therefore, Customer will clear shipment in India as well as in Dubai Customs.
• Finally, Z LLC will raise Tax invoice to Customer as per PO price.
Is Z LLC need to charge VAT when they Invoice to Customer as per UAE VAT rules and regulations?

A) As per article 11 of GGC VAT agreement, “The place of a Supply of Goods that occurs with transportation or dispatch thereof by the Supplier or to the account of Customer shall be the place where the Goods are located when the transportation or dispatch commences.” Hence in this instance Point of Sale of goods is outside the state as the transportation begin from outside UAE. Therefore, it will be outside the scope of UAE VAT and UAE VAT cannot be levied. The client should NOT raise the tax invoice, instead commercial invoice should be used.

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