The VAT in UAE is just around the corner. The next 3 days will mark the start of the new season of VAT era in the Emirates after months of extensive deliberation and anticipation in the business community about the new law. The long wait is over. The business owners are geared towards full compliance to avoid getting penalized.Here are some of the basic things to remember after 1 January 2018: VAT registration for qualifying tax persons Those who did not register for VAT as they fall below the revenue threshold of AED 375,000 over the last 12 months, shall register after 30 days of becoming qualified to register. This means that as soon as revenues reach AED 375,000 over 12 months prior, the entity has 30 days to register as a VAT taxpayer. If the state has reason to believe that a tax person is required to register but did not do so during the prescribed period, the state will register him automatically with penalties.
VAT filing and payment
The Federal Tax Authority (FTA) stipulates the frequency of filing of VAT returns and payment of VAT for each taxpayer. Each tax payer is required to comply into one of the 3 filing methods: quarterly, (standard for most entities), monthly (for large taxpayers), and annually (for small players). The due date for filing and payment is every 28th following the end of the stipulated period.
The FTA requires invoices for taxable supplies shall contain the name “tax Invoice”. Basically there are 2 types of tax Invoices under articles 59.1 to 59.12 of the VAT Regulations, namely: Simplified Tax Invoice and (standard) Tax Invoice. Simplified Tax Invoice is issued on 2 occasions: 1) sales of taxable supplies in the amount not exceeding AED 10,000 and 2) the taxable supplies are sold to non-registered buyers. The contents of the simplified tax invoice and (standards) tax invoice are included under article 59.2 and 59.1 respectively. A variation of the tax invoice is called Summary Tax Invoice. It covers all the supplies made for the same customer during the calendar month. It’s important to note that the FTA does not allow issuance of separate tax invoices for supplies made numerous times to the same customer during the calendar month. One Summary Tax Invoice is required. FTA has given Relief to issue tax invoice where the supplies are fully zero-rated.
The tax person shall keep a record of real estate transactions for 15 years. In addition, the tax person shall keep a detailed record of goods and services supplied.
Payments received and invoice issued in 2017 for supplies to be made starting 1 January 2018 are subject to VAT. It’s important to note that the reckoning point here is the date of supplies, despite that the invoice was issued in the preceding year. However, an advance payment received prior to 2018 will not be taxed if the intention of the buyer is not to incur VAT on supplies and paid an advance payment to secure the pre-VAT price.
Contracts entered prior to 1 January 2018 which do not include provision for VAT, and are to be fully or partially executed in 2018, can be considered as VAT exclusive if the recipient is VAT registered person and can show ability to recover VAT expenses. It means that standard VAT will be applied on supplies even if the contract is silent on VAT, so long as the recipient is able to recover the VAT charged to him.
Designated zones are commonly referred to as “free zones”. They are deemed to be established in UAE for VAT purposes, hence subject to VAT regulations, except for the following instance: 1) imported goods in a designated zone from outside of UAE will not be treated as imported within UAE for VAT purposes; and 2) transfer of goods between designated zones is not subject to VAT provided that 2.1) goods are not released, used or altered during the transfer, and 2.2) the transfer is done in accordance with the rules applicable for customs suspension. Except for the mentioned exceptions, free-zone companies are obligated to abide by the VAT law and required to register for VAT.