FAQs

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.

Declare Drop shipment transactions in VAT Returns

Question

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?

Answer
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

Question
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

Answer
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.

VAT Return filing date

Question
I got a message from FTA – Please note that your VAT Returns are not due to be submitted this tax period. Please refer to your dashboard for information about your filing period. I send email to them but now more than one week I did not receive the message, please guide me what to do in this situation.

Answer
The message is coming as your return is not due.

VAT Liability in case of import/export of goods

Question

We are the free zone company and we are doing export to Saudi Arabia many time ( but when the material out from our works its show in import in the auto-populated column of the vat return ) please advise how I can reverse from the same. and also advise if we are exporting through consoled shipment then how we can prove that is the export outside the country because we didn’t have the border exit document with our name.

Answer

Our understanding is that you are getting the material into mainland using your import code. Hence the value gets auto-populated in box 6 of the FTA returns portal. We need to understand the modality of your business and then we can advise the solution.

Also regarding the export proof, there is the requirement to get the official evidence of export in order to treat the transaction as zero-rated. This might involve custom formality to seek separate inspection and documentation for proof of export.

How to file VAT returns in UAE?

MCA has shared a very comprehensive guide on  How to File VAT Returns. Refer to this Returns Filing page on our website for more details

Is 2017 subjected to VAT when a contract is signed for a period of 2017-2018?

Question Asked By: Tina

I am invoicing a IT-support contract that covers support during 6 months in 2017, and 6 months in 2018. Is the period in 2017 subject to VAT. I have heard that services rendered in 2017 are not subject to VAT; but I cant find the relevant source.

Reply by Girish Chand, Director, MCA

Reference to your query, services rendered in 2017 is not subject to VAT in 2018 despite the invoicing being raised in 2018. This is covered in the transitional clauses in the VAT law.

Should we file the VAT returns after we receive the payments from our clients?

Question Asked By: Ahmed

We have received a PO for the supply of equipment in the UAE market. We imported some items from the US. We have to pay VAT along with customs.

We charged our client for 5% VAT on our invoice. Our invoice is 30 days credit terms. Our customer normally delays the payment for 60 days or even longer.

Should we file the VAT returns or this can be delayed till we receive the pending payments?

Reply by Girish Chand, Director, MCA

VAT payment to the authorities is triggered based on time of supply as per VAT laws. All VAT liabilities during the determined VAT filing period need to be settled on or before the VAT return filing date. It has no relevance and cannot be linked to customer settling the invoice.

What is considered the Place of Supply for transport services if loaded in Point A and delivered at point B?

Question Asked By:  Ehsan

I have one clarification for place of supply for transport services (in our case its goods transport).

As per Article (22) of cabinet decision no. 52, Place of Supply of Certain Transport Services:
1. The place of the supply of each transportation service is the place where the supply of that transportation service commences, where a trip includes more than one stop and consists of multiple supplies in accordance with Clause (5) of Article (4) of this Decision.

As per above provision, if A material is loaded from Abu Dhabi and delivered in Dubai. The place of supply will be Abu Dhabi?

For submitting returns, we have to mention the emirates wise supplies. We want to clarify which place (emirate) should we mention in the returns.

1. Place of supply as per the above provision. (Abu Dhabi)
or
2. Place of supply as per our (supplier) registered place of business.
or
3. Place of supply as per (customer) registered place of business.

Reply by Girish Chand, Director, MCA

As per Article 72(1) of the Executive Regulations relating to VAT laws, the Taxable Person who makes a Taxable Supply of Goods or Services in the State must keep records of the transaction to prove the Emirate in which the Fixed Establishment related to this supply is located.

So it will be point 2 – Fixed Establishment of the supplier as mentioned in your query.