GCC Indirect Tax Weekly Digest

FTA publishes Public Clarification on the use of exchange rates for VAT purposes

The United Arab Emirates (UAE) Federal Tax Authority (FTA) has published a new Public Clarification on the use of exchange rates for Value Added Tax (VAT) purposes.

The UAE Central Bank began publishing official daily exchange rates on 17 May 2018, as well as historical exchange rates for prior dates, and the new Public Clarification by the FTA provides guidance on the use of these exchange rates for tax invoice purposes.

While businesses must use the official rates published by the Central Bank when issuing tax invoices in a currency other than the UAE dirham after 17 May 2018, The Public Clarification addresses how the rates should be applied to invoices issued between 1 January 2018 and 16 May 2018.

Tax invoices issued in a currency other than UAE Dirhams prior to 17 May 2018 do not need to be reissued using the Central Bank’s exchange rates, as long as the foreign currency was converted to UAE Dirhams using a reliable source for exchange rates and the same source was used consistently.

However, tax invoices issued after 17 May 2018 which have a date of supply prior to 17 May 2018 must use the historical rates published by the Central Bank for the relevant date. For more details on the VAT Public Clarification on the use of exchange rates, please refer to our recent client alert.

FTA publishes guide on voluntary disclosures for VAT and Excise Tax

The UAE FTA has published a new Voluntary Disclosure User Guide. This follows the implementation of the voluntary disclosure feature on the FTA eServices portal in June. The guide provides an overview of the process of completing the voluntary disclosure form for Value Added Tax (VAT) and Excise Tax, and submitting it to the FTA.

A voluntary disclosure should be made by a taxable person to notify the FTA of an error or omission in their tax return, tax assessment, or tax refund application. A monetary threshold applies (see guide for details).

The voluntary disclosure must be notified to the FTA within 20 business days of discovering the error or penalties may apply.

Please refer to our recent client alert on the voluntary disclosure guide for an overview of when a voluntary disclosure is needed, as well as the steps for submitting a voluntary disclosure form on the FTA eServices portal.

Deloitte View

During the last few weeks, we have seen an increased amount of clarifications and guides being published by the VAT authorities in UAE. This suggests that the VAT Authority is dealing with a growing number of complexities as businesses begin to apply and see the implications of a new VAT regime. As a consequence, businesses can expect to see more action by the Authorities as the application of the tax matures and awareness on both sides develops to addressing compliance concerns.

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.