VAT in UAE

Dr Mashal ALZarooni

info@mazca.ae

MAZ Chartered Accountants

www.mazca.ae

The Value Added Tax (VAT) has been implemented in the UAE from January 2018. However, many clarifications have been issued by the Federal Tax Authority (FTA). The following article will discuss Tourist VAT Refunds, VAT Disputes, VAT Export of Services and VAT on entertainment.

Tourist VAT Refunds

The FTA has signed an agreement with a third party operator called Planet to refund the VAT for tourists. The tourist will receive 85% of the entitled VAT refund; the operator will deduct AED 4.80 per tax free refund form with a minimum invoice amount AED 250. There are four conditions that need to be met to refund VAT for the tourists. According to H.E Khalid Al-Bustani, Director General of the FTA (published in the news on 22 September 2018), these conditions are:

1. the retailer must be registered with the Authority for VAT and have a tax registration number (TRN);
2. the supplier’s sales of goods must not be excluded from the refund scheme, as determined by the Authority;
3. the retailer must submit a request to participate in the Scheme as determined by the FTA; and finally,
4. the retailer must meet the financial credit requirements specified by the system operator and be committed to submitting Tax Returns and paying due taxes regularly.

The refunds will be available in certain airports in the UAE for the first phase, and are expected to cover all the airports, seaports and borders of the UAE in the second phase.

VAT Disputes

The UAE government has started to establish committees to look into the VAT disputes that arise between companies and the FTA, where the company rejects the fine imposed by FTA by appealing to the Disputes committee, and the case is transferred to the courts. The committees will be set in different cities within the country.

VAT Export of Services

The VAT laws and legislation have set certain conditions for exporting services outside the UAE for VAT purposes. Services shall be zero-rated if all of the following conditions are met:

• the services are supplied to a recipient who does not have a place of residence in a GCC State and who is outside the UAE at the time the services are performed; and
• the services are not supplied directly in connection with: real estate situated in the UAE or any improvement to the real estate; or moveable personal property situated in the UAE at the time the services are performed.

Services may also be zero-rated where:

• the services are actually performed outside the GCC or involve the arranging of services that are actually performed outside the GCC;
• the supply consists of the facilitation of outbound tour packages that are part of the service.

VAT on Entertainment

The FTA published a statement last week clarifying that certain entertainment will be blocked from companies to recover the input tax on VAT; these include but are not limited to: long-service awards, retirement gifts, Eid gifts, employee of the month gifts, and dinners to reward service.

XLNC MAGAZINE | No. 02 | November 2018