The new UAE VAT law (Federal Decree Law No. 8 of 2017) has wide ranging implications to companies, their operations and their business. It is important to both understand and apply to this new framework within which VAT will be levied in the UAE.
Fichte & Co can assist with the following technical areas:
- Place of Supply: The place of supply determines whether a supply is made in the UAE or outside the UAE. As such, if the supply is treated as made outside the UAE, VAT is not chargeable. This exact definition differs between goods and services. It is thus imperative to organize your business and operations accordingly.
- Designated Zones: certain “Designated Zones” being treated as outside the state on condition that they are fenced geographical areas with security measures and customs controls in place to monitor entry and exit of individuals and movement of goods (amongst other conditions).
- VAT Groups:Under the UAE VAT Law, businesses that are related or associated parties may be able to register as a VAT group which could be a useful tool to simplify accounting for VAT.
- Reverse Charge Mechanism: This would generally apply to cross-border business-to-business transactions to relieve a non-resident supplier from the requirement to register and account for VAT in the country of the purchaser. As such, the taxable person will account for VAT on its normal VAT return and may be able to claim that VAT back on the same return, subject to the normal VAT recovery rules.
- Zero-rated goods and Exemptions
- Taxable Persons and Mandatory Registration
- Voluntary Registration
It is essential that businesses review their contractual positions to assess whether VAT will be inclusive or exclusive of their commercial agreements which have already been entered into. A strict due diligence must be conducted for companies’ accounts and commercial contracts, whether or not they are VAT registered, to avoid any liability.
VAT Fines and Penalties include:
- Failure to keep adequate records: 10,000 AED (first time)
- – 50,000 AED (repeated offence)
- Failure to submit data in Arabic: 20,000 AED
- Failure to comply with conditions and procedures related to keeping the goods in a designated zone or moving them to another designated zone: the higher of 50,000 AED or 50% of the tax
- Failure by the taxable person to issue a tax invoice or an alternative document when making a supply: 5,000 AED for each tax invoice or document
For further information and expert advice about UAE VAT and how it affects your business, please contact our legal professionals on +971 (0)4 435 7577.
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At Fichte & Co, Managing Partner Jasamin Fichte leads a team that is ‘impeccable, in all areas.’ It handles an array of high-value claims for international clients and government entities.
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