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GCC Indirect Tax Weekly Digest

March 11th, 2018

FTA clarifies VAT treatment on UAE transitional contracts

The FTA issued a statement this week clarifying who should bear the cost of VAT in UAE contracts entered into prior to 1 January 2018. The law makes it clear that where the contract states that it is exclusive of VAT then the supplier may be able to charge VAT on top of the contract price, however if the contract states that it is inclusive of VAT then the supplier will be unable to increase the cost to reflect the VAT. For contracts completely silent on VAT, the transitional rules permitted suppliers to check with their customers whether they were VAT registered and could recover any VAT charged. Provided contact was made with customers prior to 1 January 2018 and depending on the response received, VAT could be charged in addition to the contract price.

In January there was some uncertainty surrounding the correct application on existing contracts, as a large UAE-based health club began to charge VAT on the 2018 portion of memberships entered into in 2017 and was informed that as their contracts merely said that their subscription fees were ‘exclusive of VAT’ did not give them an automatic right to add VAT onto the post 1 January 2018 subscription fees.

Process for UAE business visitor’s refunds confirmed 

The FTA has released a summary user guide providing details on how foreign businesses can make claims for refunds of UAE VAT they incur as per Article 67 of the UAE VAT Executive Regulations. Requests for refunds may only be applied for every 12 months, which means that the first application can only be made after the end of 2018. The minimum threshold for a claim is AED 2,000. The process appears to be straightforward: a form should be downloaded from the FTA website, the details completed and then it should be sent to the email address provided in the guide. A more detailed manual is expected to be released shortly.

GIBAN announced as new method of paying UAE VAT

The FTA has introduced “GIBAN” as a new method for payment of UAE VAT by taxable persons, in addition to the existing means via e-Dirham and fund transfer. A GIBAN is a unique IBAN number which is given to every taxable person. It allows a taxable person to make fund transfer to the FTA through online banking channels or a bank teller. Step by step procedures are provided in the FTA guide. The option was made available from 28 February 2018. 

KSA VAT resources on GAZT website 

There are now many sources of VAT information on the GAZT website, with new details being added all the time. For a wide range of answers to common queries please check the FAQs section.

Please note that while they cover some interesting topics, you should exercise appropriate caution in applying them directly to your own business as they are for guidance only and are not intended to be relied upon.

Bahrain and Qatar confirm VAT to come into effect by end of year 

The Finance Minister of Bahrain, Sheikh Ahmed bin Mohammed al-Khalifa stated in an investment conference last month that Bahrain would go ahead with the implementation of VAT by the end of 2018 - despite earlier political opposition to the new tax. The Minister however did not give any firm date by when it would come into effect. A news source had published in January that Bahrain would be implementing VAT in early October 2018. However, there has been no official press release by the Bahraini government in this regard.

Qatar is also reported to be planning to implement VAT by 1 January 2019, according to a newspaper. This has not as yet been confirmed by official sources.

Please note that this digest is for information purposes only and should not be construed as an advice. It does not necessarily cover every aspect of the topics with which it deals. You should not act upon the contents of this alert without receiving formal advice on your particular circumstances.

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