FAQs

Can I avoid a Dh22,000 penalty imposed by the FTA?

If you fail to file the return the FTA does not recognise any payments that you have made. Therefore you get fined not only a later filing fee but also interest on the amount of the tax due, until the point at which you file the return.

The penalty for missing the filing deadline is Dh1,000 for the first offence and then Dh2,000 for every subsequent missed deadline.

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What is the best way to make a VAT payment to the Federal Tax Authority?

Making payment should be the easy part of completing the VAT filing process but many people have experienced issues. Many of the well-known banks still do not recognise the GIBAN, which is the unique IBAN number allocated to every VAT registrant.

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My landlord has issued a backdated invocie for VAT for 2018, do I have to pay?

Question: My landlord have issued me a back dated invoice for the VAT for rental in 2018. I am obliged to pay, otherwise they will not renew my tawteeque for my company. Since the VAT invoice is for 2018 and 2019, i need to know if i am able to claim it for this quarters’ filing.

Answer:
Since we do not have the details of the invoices and the current return period, we can only give a general feedback on the query.

In case of input VAT, the input VAT claim can be made for the previous and current return period only. You will not be able to claim for back dated invoices beyond previous return period.

Can my company claim back VAT for the cost of health insurance?

From the inception of VAT in the UAE it was somewhat unclear if employers could reclaim the tax charged on health insurance costs for employee families as well as direct employees. Many believed that if this was a company wide policy and included employee contracts, then they had fully met the requirements under Article 53 of the Executive Regulations. In September, the Federal Tax Authority issued a very helpful guide that clarified the position. This can found on the FTA’s website https://www.tax.gov.ae under the Getting Help menu.

The VAT law mentions two circumstances where an employer is able to reclaim VAT on employee benefits. The first criteria is where there is a legal obligation to provide such benefits. Interestingly, in Abu Dhabi it is already a legal requirement for employers to provide health insurance benefits to employees and their families, so all input VAT may be recovered. Conversely in Dubai where there is no legal requirement to extend health insurance to an employee’s family, there is no automatic right to recover it.

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Is VAT applicable on the 3-month rent-free period offered by the landlord on a 12-month contract?

Many landlords offer rent-free periods as an inducement for a new tenant to occupy their property. While it is called a “rent free” period, it is effectively a discount, where the price for a 15-month period is discounted to the standard 12-month price.

The law says the value of the supply may be reduced in the case of a discount if two conditions are both met: that the customer has benefited from the reduction in price, and the supplier funded the discount.

We received an email from the FTA Communication with the subject "Second Reminder to File and Pay your VAT Return

Question

However, we have filed all our VAT returns on time and all our in negative balance.

What does this email mean? Is this just a periodic automatic reminder from the FTA?

Answer 

This is a routine emailer where FTA is giving reminders so that the returns are submitted on time.

 

 

what is the time of supply in case of post -dated cheques. Will it be the cheque receipt date ot cheque realization date ( bank clearance)

The time of supply would depend on the type of supply. Normally it would be earlier of

  • Supply of goods and service completion
  • Invoice being raised
  • Payment received

In case of continuous invoices or periodic payments, it would be earlier of:

  • Invoice being raised
  • Payment made
  • Payment due date

How advance payment can be treated. Is proforma invoice is acceptable? And which date to be considered for tax return?

Primarily VAT is payable on occurrence of any of the following events, whichever is earlier:

  • Goods or service being delivered
  • Invoice being raised
  • Payment being received

Based on the above, VAT is payable on advance being received. Tax Invoice is expected to be raised for VAT compliance, also this would ensure that the customer can take input VAT credit for the VAT paid.

The date of receiving the advance would be the reference date and it needs to be reflected in the corresponding return period. For eg: If the advance is received on 4th April and it is monthly return filing, it needs to be shown in the April return.

We are filing quatertly, for example end of each quater we have sales of USD 5 million, within a week of so we need to pay 5% tax without waiting for customer payment. these days credit terms customes are asking 60 days or more. Here we need to pay AED 917,500. Am I correct or can we wait for customers to make payment then pay tax.?

Yes, you are right. The VAT payment has to be made on due date irrespective of the collection from the customers.

Do I need to re-register if my company's name has changed?

What the FTA has advised in this situation is that you file an amendment to your existing registration and update the registration with the new name and trade licence.

They also require a letter on company letterhead, signed and stamped, that explains why you have changed your business name. Once approved, they will make an amendment to the VAT registration name to reflect the updated company branding. Read more…