Special VAT Rules

Posted on Nov 18, 2017

Special VAT Rules

New tax law (VAT- Value Added Tax) will present itself in the gulf countries, as UAE is implementing this law from 1st January 2018, there are rules and regulations which is framed by the ministry for the levy of new law as well as there are some VAT rules that people should aware of.

Here are some of the special VAT rules that people need to be aware of:-

1 Bad debt relief

Many Companies are worried about that fact that they may need to pay VAT on sales that may later turn intobad debt (a debt that cannot be recovered).The Ministry of Finance has announced reliefs in case ofbad debts as help will be provided to resolve the case as well as to reduce the impact of bad debt. The companies can diminish their ‘output liability’ by the measure of VAT was written off but certain conditions and limitations are there, which will be all the more clear when the MOF will release more data regarding the same.

2 Cut off period

Companies should take extra care when VAT is introduced as companies ought topay attention while choosing whether a product or supply sold fall under which period, post or earlier VAT. So to decide whether these supplies are taxable or not, special rules will apply. For example if goods are delivered after VAT introduction and payment was received before still VAT will be charged.

3 Margin Scheme

In case of second-hand products as when they are bought from a non VAT enlisted user by a VAT enrolled user, only with the purpose of resale, the VAT enlisted user can include the VAT on the profit margin. That is VAT can be accounted to the contrast between the purchase price and selling price. Detailed information is yet to be announced by the ministry.

4 VAT Grouping

There are many companies in UAE that have sister concerns and are stressed on the most proficient method to represent VAT independently. Companies that fulfill certain conditions under the enactment can file for VAT returns as a group. This may help streamline the accounting for VAT with many related or partner parties.

5 Partial Exemptions

It is comprehended that input tax that identifies with exempted supplies can't recoup/recover VAT. In case there are expenses which are born by the business and that expense is related to both VAT taxable supplies and VAT non-taxable supplies.in such cases, the businesses will have to apportion input tax between the two supplies. Later the business can recover the input tax allocated to the VAT taxable supplies.

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