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23 July 2018 UAE releases public clarifications, user guides, and Cabinet Decisions on VAT Since the start of June 2018, the United Arab Emirates (UAE) Federal Tax Authority (FTA) has commenced the publication on its website of various public clarifications on complex Value Added Tax (VAT) matters and issues on the application of Federal Decree-Law No. (8) of 2017 on Value Added Tax (the Law) and Cabinet Decision No. (52) of 2017 on the Executive Regulations of the Federal Decree-Law No. (8) of 2017 on Value Added Tax (the Executive Regulations).
This public clarification addresses the issue of whether VAT is due on compensation payments. Compensation payments may include contractual payments to compensate for loss, settlements, fines or penalties and payment for damaged goods. The public clarification analyzes numerous situations and whether the compensatory payment in question is consideration for a supply, which would then have an impact on determining the VAT treatment of the said compensation-type payment. This public clarification categorizes goods which are eligible for the profit margin scheme and the conditions which need to be met to apply for the profit margin scheme. The clarification confirms that goods which have previously been subject to VAT before the supply in question, may be subject to the profit margin scheme. Goods which qualify under the profit margin scheme includes second hand goods, antiques and collectors' items. Businesses which use the profit margin scheme must ensure that they have appropriate records in place to identify goods that have been supplied under the scheme. In this public clarification, the FTA confirms that labor accommodation may be classified into two categories for VAT purposes. First, whether they take the form of a residential building and therefore are exempt from VAT (zero-rated if first supply) or second, whether it would be considered as serviced accommodation, and therefore subject to the standard rate of VAT. The public clarification lists various services that may be included with the property in the form of normal and additional services, which will ultimately categorize whether the property falls under the residential or serviced category for VAT purposes. The public clarification provides details on how to deal with invoices that were issued before 17 May 2017, invoices issued from 17 May 2018 onwards, as well as invoices relating to imported goods and services. Under Article 69 of the Law, where a supply was made in a currency other than UAE Dirham, the amount stated on the issued tax invoice should be converted into the UAE Dirham according to the exchange rate approved by the Central Bank at the date of supply. For tax invoices issued from 17 May 2018 onwards, businesses must use the exact exchange rate as published by the Central Bank, which includes using the same number of decimal places as published. For example, if the exchange rate for US dollars is published as 3.672500, the full exchange rate should be used on the tax invoice, and it is not permitted to round the exchange rate to fewer decimal places, e.g., 3.7. The purpose of this guide is to assist UAE taxpayers to submit voluntary disclosure forms to the FTA.
The guide is intended to help taxpayers file their VAT refund claims and the process to be followed when applying for a refund from the FTA. This guide should be read in conjunction with Taxable Person Guide for VAT.
The purpose of this guide is to provide users with help on how to submit clarification requests to the FTA regarding specific matters of uncertainty for which they would like further guidance.
Document ID: 2018-5895 |
