VAT REFUND FOR NEW RESIDENCES

WHERE A UAE NATIONAL OWNS OR ACQUIRES LAND IN THE UAE ON WHICH THE PERSON BUILDS HIS / HER OWN RESIDENCE, HE / SHE SHALL BE ENTITLED TO MAKE A CLAIM TO THE FTA TO REFUND THE VAT ON THE EXPENSES OF CONSTRUCTING THE RESIDENCE

WHO IS ELIGIBLE TO CLAIM?

The claim may only be made by a natural person who is a UAE National

WHAT INFORMATION IS REQUIRED TO MAKE THE CLAIM ?

To support the refund claim, a series of documents is required, including for example:

  • documentary proof to support that the applicant owns the specific plot of land in the UAE;
  • documentary proof to support the date the building is certified as completed;
  • documentary proof of the total refundable VAT that has been paid, issued by any of the verification bodies which are authorized by the FTA for this purpose.

WHAT IS THE PROCESS?

  • Request the verification body to issue a verification report
  • Submit an application form to the FTA accessible via the FTA website

WHEN IS THE DEADLINE

The Refund Form must be lodged within 6 months from the date of completion of the newly built residence which is the earlier of the date:

• the residence becomes occupied; or,

• when it is certified as completed by a competent authority in the UAE, as stipulated by the FTA.

Please factor in the time it will take to apply for and receive a verification report.

Criteria relating to the usage of expenses

• Expenses must relate to a newly constructed building which is to be used solely as a residence of the applicant and / or his / her family.

Criteria relating to the nature of expenses

Services provided by contractors, including services of builders, architects, engineers, and other similar services necessary for the successful construction of residence.

Building materials, being goods of a type normally incorporated by builders in a residential building or its site, but not including furniture or electrical appliances

ARE THERE ANY FEES FOR THE REFUND CLAIM? The FTA will not charge any fee to process your refund application. However, may be incurred a service fee from the verification body.

VAT Tourist Refund | Now You Can Get Back the VAT You Paid in the UAE

When will VAT refund scheme for tourists be applicable in the UAE?

The Federal Tax Authority – Federal Tax Authority (FTA)  has declared that Tax Refund Scheme for tourists will be initiated from November 2018. In this scheme, tourists will be able to avail for the VAT refund if they shop from retailers who are registered for Tax Refund Scheme under tax refund scheme for tourists.

When can retailers register for VAT Refund Scheme for tourists?

Retailers registered for VAT under FTA  can start registering for Tax Refund Scheme for tourists from 10th September 2018. Briefing from the FTA related to the above will be held in Abu Dhabi on September 11th, 2018 and subsequently in Dubai.

What are the conditions to avail VAT Refund Scheme for Tourist?

  • Goods should be bought by the tourist in the UAE.
  • Tourist visiting the UAE must exit UAE within 90 days from the date of shopping along with the items bought.
  • In order to get the VAT Refund, tourists should be sure only to buy from registered businesses for tourist refund scheme in the UAE.
  • FTA will lay down the procedures to be followed to avail VAT refund to the tourists.

Where can tourists avail refund of the VAT they paid for their shopping?

The tourist can refund the tax they paid for their shopping only from the outlets and point of sales which are registered under the Tax Refund Scheme for tourists.

There will be designated places where the tourists will be able to avail their VAT refund scheme through an electronic system. A digital machine will be able to determine the taxes that are eligible for refund and then the tourists shall be paid accordingly.

How to treat the amount refunded to the tourist under Tax Refund Scheme for tourists in your VAT Form 201?

Under VAT Form 201, Box No. 2 you can find the column provided for Refunds of the tax you have paid to the tourists under the Tax Refunds Scheme for Tourists.

This box can be used only by retailers who are refunding tax to the tourists in the UAE, under the official tourists refund scheme. The box should include the figures of all the tax refunds given to the tourists under the tax refunds for tourist refund scheme. It will be always a negative figure which means it is a refund you are making from the FTA.

 

UAE VAT Law on Tourist Scheme. {Source ~ Federal Decree-Law No (8) of 2017 on Value Added Tax}

As per the Article 68 Clause 2 of Executive Regulations of the Federal Decree-Law No (8) of 2017 on Value Added Tax following conditions shall apply to the Tax Refunds Scheme for Tourists:

  1. The Goods which are subject to the Tax Refunds for Tourists Scheme must be supplied to an overseas tourist who is in the State during the purchase of the Goods from the supplier.
  2. At the Date of Supply, the overseas tourist intends to depart from the State within 90 days from that date, accompanied by the Goods.
  3. The relevant Goods are exported by the overseas tourist to a place outside the Implementing States within 3 months from the Date of Supply, subject to such conditions and verifications as may be imposed by the Authority.
  4. The phrase “overseas tourist” means any natural Person who is not resident in any of the Implementing States and who is not a crew member on a flight or aircraft leaving an Implementing State.
  5. The Authority may publish a list of Goods that shall not be subject to Tax Refunds for Tourists Scheme.

Refund of the excess recoverable tax amount – Form VAT 311.

There is a confusion in the market that the form VAT 311 available can be used for Tax Refund Scheme for Tourist, which is incorrect. If one has to refund to the tourist the tax amount they paid against their purchases, the retailer or the point of sale should be registered under Tax Refund Scheme for tourists. Then, the amount they pay back to the tourist can be claimed back through form 201 – Box No. 2.

After submitting the form 201, if the registered person is in a net recoverable position an option will be available in the VAT Return to request a refund for the excess recoverable tax amount.  If he selects “Yes” for the refund, he has to complete the VAT Refund Application Form VAT 311. This is done after submitting the VAT Return for the respective tax period. If he selects “No”, the excess recoverable tax amount will be carried forward to the subsequent Tax Periods. This can be used to offset against tax liability or penalty arising in future or can apply for refund later. Nowadays, there is a requirement to submit a bank account validation letter / certificate along with the form 311.

Labour Accommodation for VAT purposes

What is the treatment of Labour Accommodation for VAT purposes?

Labour Accommodation: Some of the labour accommodation will be treated as supply of residential property, and some of the labour accommodation will be treated as supply of serviced accommodation.

If the labour accommodation is considered as supply of residential property it will be treated as zero percentage or exempted. If additional services are given to a labour accommodation it will be treated as serviced accommodation and will be taxable at 5%.

However, the following basic services shall not be considered as part of serviced accommodation:

  • cleaning of communal areas
  • maintenance services required for the general upkeep of the property
  • pest control
  • garbage collection
  • security
  • utilities e.g. electricity, water, etc.

Profit Margin Scheme

What are the recent clarification issued on Profit Margin Scheme?

Profit Margin Scheme: Only those goods which have previously been subject to VAT before the supply may be subject to the profit margin scheme. As a result, stock on hand of used goods which were acquired prior to the effective date of Federal Decree-Law No. (8) on Value Added Tax (“VAT law”), or which have not previously been subject to VAT for other reasons, are not eligible to be sold under the profit margin scheme.

VAT is therefore due on the full selling price of such goods.

Foreign Currency Exchange Rate for VAT purpose

How to record currency Exchange Rates in your books of accounts?

Exchange Rates: Article 69 of Federal Decree-Law No. (8) of 2017 (“VAT Decree-Law”) requires that where a supply was made in a currency other than UAE Dirham that the amount stated on the issued tax invoice should be converted into the UAE Dirham according to the exchange rate approved by the UAE Central Bank at the date of supply.

The UAE Central Bank began publishing exchange rates on 17 May 2018. Businesses are required to use UAE Central Bank rate on any tax invoice issued in a currency other than the UAE Dirham from this date onwards.

Any tax invoices issued in a foreign currency prior to 17 May 2018 should have been converted to UAE Dirham using a reliable source for exchange rates such as Oanda, Thomson Reuters, UAE Bank Rates etc.

There will be no need to rework tax invoices issued prior to 17 May 2018, provided they used exchange rate from any of the reliable source consistently.

Voluntary Disclosure form 211 – When is required to be filled ?

When to use Voluntary Disclosure Form 211?

Voluntary Disclosure Form 211:  A Voluntary Disclosure is a form provided by the Federal Tax Authority if the Taxpayer notifies an error or omission in a Tax Return, Tax Assessment or Tax Refund application.

Voluntary Disclosure form need not be used if the underpaid tax amount is AED 10,000/- or less. It can be corrected through the Tax Return for the tax period in which the error has been discovered (i.e if the error occured in a particular quarter was found in subsequent quarter , the same can be rectified in the subsequent quarter when identified , no for required)

If the unpaid tax liability is more than AED 10,000/- it can be rectified using voluntary disclosure form 211.

 

Do you know that Director Services are Taxable ?

Taxability criteria for Director Services?

Director’s Services: The general rule is that directors provide a service for VAT purposes to their company. As such, if the fees for services (in addition to any other supplies that might be made by the person) exceed the VAT mandatory registration threshold, namely AED 375,000, then directors are liable to register for VAT and charge VAT on the director fees. Specifically, services provided by a director should be taxable if:

  • the director undertakes services on a regular, ongoing and independent basis (such as an individual who acts as an executive or non-executive director on a board or a number of different boards); and
  • the total value of taxable supplies and imports made by the director, including supplies of director services, exceed the mandatory registration threshold.

A director may also choose to voluntarily register for VAT where the value of taxable supplies (including director fees) exceed the voluntary registration threshold of AED 187,500.

Which are the expenses from which input tax are not recoverable?

Which are the expense from which input tax are not recoverable?

Non-Recoverable Input Tax –  VAT incurred on any costs which are used for a genuine business purpose, or which are incidental to a business purpose e.g. food and drink provided during a business meeting, shall be recoverable (subject to normal VAT recovery rules).

The food and drinks will become entertainment in nature if the purpose of attending the event is for food and drinks and hence, input tax paid on such expenses cannot be recovered.

Input tax can be claimed on hospitality expenses only if it includes the basic amenities provided to the employees. If hospitality is given for the purpose of attending events or entertainment purpose for Customers, Shareholders, Potential Customers, Officials, etc., such costs will be considered to be entertainment in nature and the VAT incurred shall not be recoverable.