There are mainly three types of VAT in UAE. That is Standard Rate, Zero Rated and Exempt Supplies
1. Standard Rated and Zero Rated are taxable supplies while exempt are non - taxable supplies
2. On Zero rated supplies there is not vat but it is still considered as taxable supplies
3. When we are calculating the revenue we should also consider zero rated sales for registration purposes and we must have to mention the total amount of zero rated sales in vat return of each quarter
4. We can claim input vat on zero rated sales just like standard rated sales. We can only not claim Input vat on exempt sales
5. If the supply is zero rated or exempt. Zero rated will always take priority
Imports by VAT law is goods or services that would be taxable if bought in the UAE. VAT is applicable and paid at the point of entry of import of goods into UAE. VAT on services imported is applied on by the reverse charge mechanism.
To pay and claim vat on imports, importer has to keep the evidence of the documents of imports and custom documents (Article 48 of the regulation).
Any unregistered business or individual cannot claim vat but he must pay to authority on imports.
Exports of goods are zero rated. Services are also zero rated when these are given to the person which is outside of GCC. Export can be either direct or indirect. It depends on how the delivery is arranged by the recipient or by the supplier. (Art.30 of the regulations)
Any transaction which is meeting the following criteria will fall under the scope of UAE Vat law.
1. It should be the supply of goods or services.
2. It must take place in UAE
3. It is made by the taxable person. A taxable person by law is the firm, entity, individual or company which is registered for vat or is required to be registered for UAE VAT
4. It is made in the course and intercurrence to carry on the business which is registered.
If any transaction which is not meeting all of this above criteria is out of scope of UAE VAT. But sometimes these criteria is meeting but the transaction is still out of scope e.g The transaction of selling of an ongoing business.
Tax Invoices The Agreement requires tax invoices to be issued in relation to the supply of taxable goods or services, including a deemed supply, and in cases where there is either full or partial receipt of consideration prior to the supply. The GCC Ministerial Committee determines the minimum details required, and the VAT Law and Regulations specify both the content and timings for the issuing of invoices. The VAT Law requires that the taxable person must issue an original invoice and deliver it to the recipient of the goods and services, including where the taxable person has made a deemed supply, unless there is no recipient, in which case it must be kept in the taxable person’s records.
A valid tax invoice must show the following:
a)The words ‘tax invoice’ in a prominent place;
b)The supplier's name, address and Tax Registration Number;
c)Where the recipient is VAT registered, it must show the recipient's name, address and Tax Registration Number;
d)A sequential, number based on one or more series which uniquely identifies the document invoice number;
e)The date when this Tax invoice is being issued;
f)The date of the supply i.e. tax point, if different from the invoice date;
g)There must also be a description sufficient to identify the goods or services being supplied;
h)The invoice must also for each description of goods or services on that invoice show the unit price, the quantity or volume supplied, the rate of tax and the amount payable expressed in AED.
i)The amount of any discount offered;
j)The gross amount payable, expressed in AED;
k)The tax amount payable, expressed in AED together with the rate of any exchange applied and the source of the exchange rate applied where the currency is converted from any currency other than UAE dirhams;
l)Where the customer is required to account for VAT, e.g. reverse charge, then a statement to that fact and a reference to the relevant provision of the law.
Art. 67 of the VAT Law requires that a tax invoice must be issued within 14 days of the date of supply. If the currency stated on the invoice is not AED then the amount stated will be converted into AED, according to the exchange rate approved by the Central Bank at the date of supply. If there are or will be sufficient records available to establish the particulars of a supply, a taxable person is not required to issue a tax invoice where the supply is a wholly zero-rated supply. (Art. 59(3) of the Regulations)
As of supply of services, it generally takes place on the earliest of dates:
• when the services were performed;
• when (and to the extent) the services had been paid for;
• when a tax invoice for supply was issued.
In relation to continuous supply of services, a supply will take place each time a payment was made or on the payment date specified on the invoice issued, whichever is the earlier, and at least once in every twelve month period.