You can’t miss the countdown clock on the landing page of the Federal Tax Authority (FTA) website, reminding us that in just 33 days’ time, VAT in the UAE will be a reality.
The much anticipated Executive Regulations to the UAE VAT Law (Federal Decree Law No. 8 of 2017), Cabinet Decision No 52 of 2017 (the “Regulations”) was published today on the FTA website. As expected, the Regulations include lots more detail on the application of VAT, tax groups and what is to be deemed exempt and zero rated (amongst other things), but there is also an significant, potentially very valuable, if fleeting, saving provision too, which should not be missed.
The sole focus of this alert is to ensure that those suppliers with currently existing contracts that will have ongoing supplies after 1 January 2018, and which are silent on the application VAT on their prices, are aware of an opportunity over the next few weeks to redress that void in their contracts.
The general position under the VAT Law is that prices are inclusive of VAT, meaning that unless a contract itself states that VAT can be charged in addition, the supplier will not be able to seek that 5% from its customer. Rather, it will have to account for 5% per supply to the FTA from its own pocket.
But, there’s a possible opportunity in these closing days of 2017 for suppliers to issue notice to all recipients of goods or services under such ongoing contracts, thereby standing to benefit from being able to charge that additional 5%, even where its contract is silent on VAT. Notices must, however, be issued to customers before 1 January 2018.
In brief, if you’re a supplier, the message is simple; take action, check your contracts and write to your customers now before it’s too late. The countdown clock is ticking…