VAT

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GCC VAT Updates

Implementation from 1 Jan 2018

Rates – standard rate 5%, 0%, exempt supply and reduced rate.

On supply of goods and services

150 food items, health and education will be exempted or 0 rated, according to Minister of State for Financial Affairs.

Return filing on monthly or Quarterly basis

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GCC VAT Updates (Continued)

Registration threshold - Annual revenues over Dh3.75 (USD 1Mn) million will be obliged to register and revenues range between Dh1.87 (USD 500K) million and Dh3.75 million will have an option to register.

VAT implementation in the UAE under Federal Law number (13) of 2016.

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VAT Rates

Which VAT rate is good for you

Exempt?

Zero?

5%

Reduced rate?

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GCC Tax

Why VAT first?

Why not Corporate Income Tax?

Why not personal income tax?

Why not WHT?

Source of GVT information

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What is VAT?

VAT (Value Added Tax) is a tax that is added on to most things you buy, both goods and services

VAT is collected from you by businesses and paid to Government

VAT does not result in businesses paying more tax

Businesses will collect VAT from you and me, and pay VAT on what they buy. The difference between those amounts will be paid to, or collected back from Government.

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Important Terminology

Input tax – Tax paid on purchases

Output tax – Tax charge on sale

Input credit- The amount of input tax that is PERMITTED to be set off against output tax

Non-recoverable Input VAT - Input tax cannot be recovered

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Time of Supply

A supply of goods or services occurs on the earliest of the date on which;

The goods are delivered or made available or the performance of services is completed;

An invoice for the supply is issued by the supplier; or

Any consideration for the supply is received.

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Place of supply of goods

The basic rule is that supplies of goods in the State are subject to VAT in the State

Where goods are installed or assembled, the place of supply is the place where the goods are installed or assembled.

Where goods are supplied on board vessels, aircraft and trains during intra-GCC transport, the place of supply is the place where the transport begins.

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Imports

As a general rule, imported goods are liable to VAT at the same rate as that which applies to the sale within the State of similar goods

VAT, along with Customs Duty, is normally payable at the point of importation.

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Exports

As per current discussions we understand that Exports are goods directly dispatched to a destination outside the GCC VAT area.

Generally the zero rate of VAT applies to all supplies of goods that are transported directly by or on behalf of the supplier to a destination outside the GCC VAT area.

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TAX INVOICE

A VAT registered taxpayer should ensure that he receives a tax invoice when he makes a purchase from another registered taxpayer.

He will be able to support his claim of the VAT he paid on purchases for his business, but he must keep the tax invoices he received.

Similarly VAT invoices must be issued to ensure registered taxpayers claim their input tax.

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TAX INVOICE (Continued)

Information should be included on tax invoice

The term “Tax Invoice”; The supplier’s and purchasers Tax Identification number (TIN),

name and address; Date of supply; Quantity, description of goods or services, unit price of items; The rate and amount of any cash discount offered; Total consideration, excluding tax; Tax rate Total tax charged; and Total price payable by the recipient.

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Tax invoice sample

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How it works

When a business charges VAT on a sale, they are collecting that money on behalf of Tax Department.

If a business is VAT registered they can reclaim the VAT they have paid on purchases.

The difference between what they have charged on sales and what they have paid on purchases must be sent to tax department

Output – Input = VAT Payable

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Output VAT schedule

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Input VAT schedule

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VAT Return Sample

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Bad Debt

Following information is required in order to claim bad debts;

The time and nature of supply, customer’s name and consideration- normally a VAT invoice will show this.

The amount of VAT and the accounting period it was paid.

Any payment received from customer to date

The provision made for the bad debt.

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Few issues

Cash flow

Compliance cost

Resources/ expertise

System support

Law changes/keep on changing

Information/ guidance from GVT – Slow/non

Tax department working style – GCC

Contractual term about VAT

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An operational overview of VAT within a business

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What System Should give us

Input Schedule – Per quarter or month

Output schedule - Per quarter or month

VAT Payable calculation as per Return format

Revenue reconciliation between output tax and the actual sales

Purchases reconciliation between input tax and the actual purchases

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What System Should give us (Cont)

Details of 0% Supply

Details of Exempt supply details

Non-recoverable input vat details

Details of bad debts write-offs

Payment and filing remainders

Registration threshold alerts.

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What System Should give us (Cont)

Any other additional details required by legislation

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Record keeping

Recommended retention periods for financial documents including tax returns, source documents, accounting records, and financial statements are as follows;

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Q&A

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Thank you