VATGIT1 – Input Tax Apportionment: Special Methods (Update)
The Federal Tax Authority (‘FTA’) has published an updated version of the Input Tax Apportionment: Special Methods Guide. The following modifications and clarifications have been made in the updated guide:
- The FTA requires calculations for a period of 12 months preceding the application (previously the FTA requested calculations for a period of at least 6 months);
- The updated guide includes Appendix 3 which is a list of common mistakes made by the applicants while filing application for taking approval from FTA to use one of the Special Methods;
- RCM transactions need to be excluded from the calculations based on the Output method;
- Communal areas (lobbies, lifts etc.) should be removed from the Floorspace method calculation;
- Input transactions should be excluded (including RCM) from the calculations based on Transaction Count method;
Businesses should also ensure that there are no deviations in the calculations provided vis – a – vis in the VAT returns submitted. If there are deviations, businesses need to explain the deviations when submitting the application to the FTA.
Customs Notice No. 8 / 2019: Addition and amendment of Customs Tariff
This notice mentions revised HSN code to be used for the import of Excisable goods. Excise tax at 100% or 50% shall be levied based on the HSN code of the Excisable goods selected.
Further, the FTA has clarified that going forward Excise Declarations shall be required before a product is cleared from the Customs department. The Declaration can only be filed if the correct HSN code is used and the product is registered with FTA.
The electronic system for VAT Refunds for Tourists Scheme has processed a total of 2.83 million applications since its launch in November 2018. The average daily number of applications which the scheme processes has doubled, going up from 3,800 in the first month to 7,730 requests per day.
Tourists can request a refund of VAT which they incurred during their stay in the UAE as they proceed to exit the Country. Applicants are required to submit VAT invoices for their purchases, which must carry the VAT refund stickers issued from retail outlets that are registered in the system. They must also present their passports and credit cards in order to process the refund claim.
The FTA has recently updated its e-learning presentation on Errors and adjustments including Voluntary Disclosures.
Below are the updates in brief:
New Executive Regulations published
The Qatar General tax Authority (‘GTA’) has recently published new Executive Regulations revoking the previous Income Tax Law No. 24 of 2018. The new Regulations provide clarification on Withholding Tax, Permanent Establishment, Transfer Pricing and Tax losses among other topics.
The new Regulations are effective from 12 December 2019, while the documentation for Transfer Pricing requirements apply for tax years ending 31 December 2019.
- Public Clarification: Proportional Deduction Ratio
The clarification explains how financial institutions should calculate their income on margin transactions for the purposes of determining their proportional deduction ratio for input VAT.
The Guide states that financial institutions should use the standard apportionment method i.e. the value of supplies arising on margin transactions carried out by the institution should be the “absolute value” of such transactions. Where the transaction results in a profit, the absolute value is the amount of the profit. Where the transaction results in a loss, the absolute value is the loss converted into a positive amount (i.e. drop the negative sign).
Financial institutions are required to use the absolute value with effect from 1 January 2019 (or the effective date of registration for VAT purposes, if later). There is no requirement for financial institutions to submit amended VAT returns for previous VAT periods.
The National Bureau for Revenue (‘NBR’) has released guidelines on VAT treatment of Educational Services and supply of goods and services related to it. The guidelines also clarify recoverability of VAT on costs incurred by the Educational Institutes, treatment of Grants and Sponsorship and online educational services.
The NBR has released guidelines to classify businesses according to the activities carried out by them. The classification aims at categorizing the businesses into various categories which can be utilized to collect and publish statistics accordingly. It is the responsibility of the VAT payer to identify the sub-level details and input them correctly into the VAT registration form.