VAT

Tax Alert - January 2020

UAE Updates

Value Added Tax (‘VAT’)

 

  • VATP017 - VAT Public Clarification – Time Frame for Recovering Input Tax

The Federal Tax Authority (‘FTA’) has clarified issues with regards to the timeframe for recovery of input VAT i.e. the FTA’s position relating to the interpretation of Article 55 of the UAE VAT Law and discusses the time-period within which the input VAT must be recovered. It also discusses the recourse available to taxable persons in cases wherein input VAT is not recovered within the prescribed time period;

The summary of the clarification is as under:

  1. Input VAT must be recovered in the first tax period in which two conditions are satisfied:
    • the tax invoice is received; and
    • an intention to make payment of consideration before the expiration of six months after the agreed date of payment is formed.
  1. In regard to a condition related to ‘intention to make payment’, the FTA considers that intention is established only if the taxable person completes the internal approval process (for the supplier invoice) and forms an intention to make the payment within the prescribed period. This implies that where the supplier’s payment is not approved by the Company, the intention to pay cannot be established and hence, the VAT recovery condition does not stand fulfilled. The intention to pay has to be substantiated.

Key Points:

  • For the avoidance of doubt, please note that where a tax invoice is received in one tax period and the intention to make the payment is formed in a later tax period, input VAT can only be recovered in the later tax period;
  • Where a taxable person fails to make the payment of consideration before the expiration of six months after the agreed date of payment, the taxable person should reduce the input VAT in the VAT return of the tax period following the expiry;
  • Where input VAT is not recovered in the tax period in which both the conditions are satisfied, the taxable person can recover input VAT in the immediate next tax period;  
  • If input VAT is not recovered in the first two tax periods when both the conditions are met, a taxable person is required to submit a voluntary disclosure. The voluntary disclosure should amend the input VAT reported in the VAT return of one of the two tax periods.

 

The Decision can be accessed here

  • New Residence VAT Refund

After a press release mentioning a change in filing for VAT refunds for UAE nationals on the construction of their new residences in November, the FTA has now released a detailed user guide. The guide explains how an account must be created and the steps for completing the online form.

The guide also specified that a person is not required to register as a taxable person if he is a new user registering only for the purposes of applying for a new special refund.

The guide can be accessed here

 

 

  • Cabinet Decision No. 1 of 2020 – Refund of VAT paid on goods and services connected with Expo 2020 Dubai 

The FTA has published a new decision in relation to VAT refunds for Expo 2020. This decision cancels and replaces Cabinet Decision No. 1 of 2019. As per the new decision only the office of the Official Participant may claim a refund of VAT incurred on the import of goods for personal use by the Official Participant’s Section Commissioners-General, Section Staff and the Beneficiaries.

Moreover, a VAT refund can be claimed on all operations, services and activities provided for the purpose of participation in Expo 2020 Dubai, whether located within or outside the boundaries of the Expo 2020 Dubai site as opposed to only activities directly connected to Expo 2020 or the actual activities of the participants.

The guide can be accessed here

 

 

  • Turnover Declaration Form

 The FTA has released a new form that must be used by a person applying for VAT registration to declare his taxable turnover.

The form can be downloaded here

 

  • Change of email address 

The FTA has released a form in case the official email address of the registrant is to be changed. This must be filled and submitted to the FTA whenever a registrant wishes to change his official email address.

The form can be downloaded here

 

GCC Updates 

Bahrain

 

Simplified VAT Filing

The National Bureau for Revenue (‘NBR’) announced that (enterprises subject to VAT) VAT payers, whose annual supplies are less than BD 100,000 will be able to submit a simplified one-time VAT filing document annually to facilitate approval procedures.

The announcement made by NBR is based on a decision made by the Cabinet during its meeting on 23 December 2019, aimed at facilitating VAT filing procedures for smaller enterprises.

The press released can be read here

 

 

  • Calculation of Related Party transactions

The NBR has clarified the calculation of fair market value in case of related party transactions in its FAQ section. In case the market value cannot be determined, the NBR expects this to be determined based on the methodologies set out in the guidelines issued by the Organization for Economic Cooperation and Development (OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations).

The FAQ also clarifies that the NBR will not provide pre-approval of any methodology used by a VAT payer to determine the market value of related party transactions.