FAQs

A supplier failed to charge Vat in his invoice is there any penalty to the recipient/supplier?

Question

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?

Answer 

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.

 

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.

GIBAN PAYMENT USER GUIDE SUMMARY

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 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

What is the VAT on discounts and reductions?

The Federal Tax Authority (FTA) has said that the final reduced prices for goods on promotional offers must include the 5 percent Value Added Tax (VAT), which is to be calculated as included in the new price after reductions by the sales outlets or service providers themselves.

In a new awareness message issued today targeting consumers and service recipients in the UAE, the FTA said that in cases of discounts on regular sale prices, or during seasonal discounts and “buy one get one free” promotions, VAT must be included in the final amount to be paid after deduction includes VAT as per the reduced amount.

What is VAT all about?

Value Added Tax (or VAT) is an indirect tax. Occasionally you might also see it referred to as a type of general consumption tax. In a country which has a VAT, it is imposed on most supplies of goods and services that are bought and sold.
VAT is one of the most common types of consumption tax found around the world. Over 150 countries have implemented VAT (or its equivalent, Goods, and Services Tax), including all 29 European Union (EU) members, Canada, New Zealand, Australia, Singapore, and Malaysia.
VAT is charged at each step of the ‘supply chain’. Ultimate consumers generally bear the VAT cost while Businesses collect and account for the tax, in a way acting as a tax collector on behalf of the government.
A business pays the government the tax that it collects from the customers while it may also receive a refund from the government on the tax that it has paid to its suppliers. The net result is that tax receipts to government reflect the ‘value add’ throughout the supply chain.
We can draw link to our animated explanation of VAT here

Will zero-rated supplies count for the registration threshold?

Yes, the taxable supplies including zero-rated supplies count for the registration threshold. However, note that it might be possible that some GCC member states will allow, under certain conditions, a company which only makes zero-rated supplies to be excluded from the mandatory registration on request. The UAE and KSA have indicated that they may allow such exclusions in certain cases.

Source: Deloitte

Which countries will implement VAT on 1 January ?

The issue of local laws in the KSA and United Arab Emirates (UAE) confirms earlier announcements by these countries that VAT will be introduced domestically in January 2018. It is unclear when the rest of the countries will implement currently but this is expected to progressively happen through 2018.

Source: Deloitte

Do you think that there will be much variance in application of the rules between member states?

There will be a level of variance in application of the rules across the GCC member states. Similar to the EU, there are some provisions which are compulsory, and others which are optional, and others where there is a choice to be made on treatment at a local level. How each member state approaches the implementation of these provisions is likely to depend on their individual policy settings, economy, etc.

Source: Deloitte