How a company can claim a refund on excess VAT
When a company files its tax returns, it is required to list the details of sales, purchases output VAT, and input VAT paid over the past three months.
The output VAT is the amount of tax collected on the company’s sales, and the input VAT is the amount paid to the supplier towards purchases and expenses.
If the output VAT is less than the input VAT, the excess balance will be deemed VAT refundable.
How to update VAT registration information that has expired?
VAT has now been in place for almost a year and therefore most registered companies will have renewed their trade license since they first registered for VAT. The FTA requires information uploaded at the time of registration to be updated each year as it expires. This includes the trade licence and the passports and Emirates IDs of the company owners.
To start the amendment, click on the link on your FTA dashboard. Once you start an amendment you are prompted to re-enter your Emirates ID and passport even if the documents uploaded at registration are still valid. Then work your way through the amendment pages which follow the format of the initial VAT registration.
While the portal does not force you to update the annual turnover or upload your most recent year-to-date financial statements, several VAT experts suggest doing this as you need to certify on the last page that the information you are submitting is correct. Note the FTA request that the amendment is filed within five working days to avoid difficulties.
Click hereto know more
Can I take on new orders without a TRN Number?
Once you have submitted your voluntary tax application on the FTA’s online portal you have to wait until they have reviewed the uploaded information and the registration is accepted before you can submit invoices with VAT included. Until that point, raise invoices that do not mention the words VAT or TAX and do not add VAT to the amount invoiced. Including VAT in the invoice is against the Decree Law and would result in fines and penalties if later identified during an FTA audit.
Between applying for your VAT registration and receiving your TRN, you should not lose customers, you just have to invoice them without VAT. However, as you don’t yet know the date you will received your TRN and the effective date of registration the FTA will give you, I suggest advising customers in advance that your invoice may or may not include VAT. If your customers are VAT registered, they should be indifferent to this as they can reclaim any VAT charged. Non-VAT registered customers will be most affected as they may get an invoice without VAT or pay 5 per cent more if you need to invoice them with the tax applied. What you want to avoid is raising invoices without VAT and the FTA backdating your registration to the start of the month. If that happens, you would have to account for the tax on the revenues already invoiced even though you have not charged it to your customers.
Click here to read more
A supplier failed to charge Vat in his invoice is there any penalty to the recipient/supplier?
A supplier failed to charge Vat in his invoice. However, in the next month billing cycle he charged Vat for that month as well as VAT of earlier month (which was not charged). Payments are progressive based on certified value. Is there any penalty to the recipient/supplier?
In case VAT is not charged and the returns are not filed, it can be adjusted in the next invoicing cycle within the same tax period.
Where the VAT is not charged and returns are filed:
- If the value of VAT is less than AED 10k, it can be adjusted in the next invoicing cycle.
- If the VAT value is greater than AED 10K, then there is the option of voluntary disclosure, which would have its own cost.
Consultancy services to a company in Kuwait, which has no branches in UAE.
I am providing consultancy services to a company in Kuwait, which has no branches in UAE. The services are provided by way of emails only. Could you kindly clarify the following:
1. Are the services zero-rated?
2. Is the place of supply Kuwait?
As per Article 31(1)(a) of the VAT Executive Regulations, where the Services are supplied to a Recipient of Services who does not have a Place of Residence in an Implementing State and who is outside the State at the time the Services are performed, the services can be zero rated.
In the absence of agreement at the GCC level, the Implementing State condition is diluted to outside State (UAE).
The services described falls in the above criteria, hence it will be zero rated.
We are transportation “Taxi” under exempted category
We are transportation “Taxi” sector in Abu Dhabi under exempted category with 1347 taxi vehicles.
As per Regulator (ITC) the taxi vehicles should not be work more than 5 years or pass 700,000 km whichever is earlier, we always do de-fleeting (replacement) and change the expired car by low with a new one by selling the used/expired one thought formal Bidding, please advise on the following :
A. In case of the sale price for used car is over the net book value is this transaction subject to VAT?
B. In case of the sale price for used car is less the net book value is this transaction subject to VAT?
(A&B) Answer – In the context of VAT, VAT is applicable on the consideration of the good sold. So in this case it is applicable on the sale price (consideration). It has no relation to NBV.
C. What is the method of selling the used car value selling price or NBV-VAT paid for purchase).
(C) Answer – Consideration for VAT is the selling price.
D. If I am selling the existing cars which I bought prior to VAT implementation so is this transaction still subject to tax?
(D) Answer – Yes, VAT is applicable on the sale transaction.
Can we capitalize the VAT paid for assets purchase as an child asset over the life cycle?
Can we amortize the VAT paid for assets purchase by coding the VAT as prepayment to be amortized over the life of assets?
2 & 3. Answers – Normally wherever there is VAT paid, it is recorded as VAT receivable in Balance sheet as it is input tax credit recovered against the output tax payable. It is not to be capitalised with the asset.
However in your case, as transportation is exempt revenue, you would not be claiming input tax credit. The accounting treatment for VAT on asset purchase – expensed/capitalised/prepayment is something to be agreed with your Management/Auditors.
Can we amortize the VAT paid for service & rental by coding the VAT as prepayment to be amortized over the agreement?
4. Answer – Normally wherever there is VAT paid, it is recorded as VAT receivable in Balance sheet as it is input tax credit recovered against the output tax payable. It is not to be capitalised or treated as prepayment.
However in your case, as transportation is exempt revenue, you would not be claiming input tax credit. The accounting treatment for VAT on service/rental – expensed/amortisation is something to be agreed with your Management/Auditors.
If Company A in UAE provides accounting services to Company B of USA. Is it taxable? Is it charged at standard rate of 5% or 0%?
In case of services given to customers outside UAE, it is a zero-rated VAT service. Tax invoice should be raised and reported in the VAT return.
What is GIBAN shown on my FTA tax page?
The GIBAN is a special bank account number created for every taxpayer by FTA to facilitate the payment of VAT via any UAE bank. You can add FTA as a beneficiary and use the GIBAN assigned to you as their IBAN (Account number). Now when you make a payment using this GIBAN to FTA, it will be credited to your account.
It is advisable that you check on the FTA site after 24 hours to ensure that the payment is reflected against your account. This can be viewed under Transaction History tab.
Declare Drop shipment transactions in VAT Returns
I have a company in Rak Freezone.
Some of my business includes drop shipping ie I order from my suppliers in China and then deliver directly to customers outside of the GCC.
In this case, how do I declare this income in my VAT return?
Drop shipment transactions would be out of scope and need not be reported in the returns. However the details of transactions should be maintained for audit trail and future reference.
VAT Applicability of Designated and Free Zone export and import of goods
Our Standered Operative system is as under.
We are in Free Zone/Designated Zone.
Maximum of the Purchase are Imported by Sea, which is the real import against duty deposit.
Some material comes from Mainland companies with VAT and some from the designated zone with zero vat.
Our Maximum Sales is as export outside the country with the document maccasa with duty paid at our custom office.
Sometime in export sale customer tell he will arrange the consoled transport for getting the material then we send the material with the local out document but the material in really gone out of the country.
And we have few businesses in the mainland and we cleared the material with our custom code and make tax invoice.
I explained our business operation above
Now please advise what exactly we do.
If we send the consolidated shipment and the same will treat as export and if we sold in local/export mainland and the same will not come in our import box no. 6
If the goods are exported outside the country and there is commercial and official evidence of the export, it will be zero-rated for VAT.
If sold in local/ export mainland, this will be out of scope as the customer is importing into the mainland and he will pay the VAT on RCM basis.