Contracts silent on VAT - Action required in the UAE before 1 January 2018

Contact customers before 1 January 2018 to treat consideration as exclusive of VAT under silent contracts

The Article 70(6) of the UAE Executive VAT Regulations confirms that where a contract signed before the introduction of VAT is silent on VAT, it is possible to treat the consideration as exclusive of VAT if the following conditions are met:

• the recipient of the goods or services is a registrant; and
• the recipient can recover the input tax incurred on the supply in full or part.

However – this treatment is only permitted if before 1 January 2018, the supplier requests from the recipient to confirm:

• that they are or expect to be a registrant on 1 January 2018; and
• the extent to which they expect to be able to recover the input tax on the supply.

The VAT Regulations allow the recipient a period of 20 business days to reply to this request. As such we recommend that you contact all your customers in respect of affected contracts and try to obtain this information as soon as possible in order to treat these contracts as exclusive of VAT.

If you do not receive a response from your customer after this period, you may treat the consideration as exclusive of VAT. But you must have contacted your customer prior to 1 January 2018 in order to apply this treatment.

A record of both your information request and the response from your customer must be retained as part of your VAT records.