The UAE introduce the New VAT Rules. The rule will apply to any used Pre-Owned Items such as household items, furniture, automobiles, and electronics. Recently the FTA (Federal Tax Authority) announce the news of five percent on the sale and purchase of a used product such as cars and furniture etc.
Anurag Chaturvedi, managing partner, Chartered House said “That product purchased Before on 1st Jan 2018, the customer will have to pay the VAT on full-price but if the product has bought in this year so then the seller can claim VAT only on the profit margin and not on the entire value of the pre-owned product.
Three UAE Free Zones Exempted Areas
The Federal Tax Authority (FTA) has declared three new UAE free zones that will be exempted from the VAT, adding them to the list of vat-free designated zones. The total number of designated zones in the UAE now stands at 23, after the latest edition. All these areas are out of the scope of the UAE VAT, which was implemented in January this year.
According to the Federal Decree Law No. (8) of 2017, any area that meets certain eligibility conditions is regarded as a designated zone and will be treated as out of the VAT scope.
The newly added free zones to the list are Al Bateen Executive Airport Free Zone in Abu Dhabi, Al Ain International Airport Free Zone, and International Humanitarian City – Jebel Ali in Dubai. No VAT shall be applied on the transactions done within the new Designated Zones besides a few exceptions.
“Some businesses in these designated zones may potentially now deregister for VAT purposes. It will be important for them to assess again their transactions in the zone and determine which ones are actually subject to VAT and which ones are not. Although this constitutes an important relief, the transactions with designated zones can be complex,” said Thomas Vanhee, partner at Aurifer Middle East Tax.
A Designated Zone is a specific region in the UAE that is treated as outside the implementing States for the VAT purpose. Since these zones are out of the purview of the VAT UAE, the computation of VAT on the supplies made from a Designated Zone requires a different mechanism.
VAT applicability to services supplied from a Designated Zone in the UAE is slightly different from the supply of goods because the place of supply for such services is treated to be in the UAE even if it is a designated zone.
At present, there are 20 Designated Zones in the UAE out of the total 45 free zones. A free zone and a designated zone is not necessarily the same thing for the purpose of the VAT. This article explains the VAT rules for goods and services supplied from a UAE Designated Zone. Read More
Following the release of the GIBAN system to make it easier for UAE residents and businesses to pay their VAT dues, the FTA has now started accepting VAT payments through UAE Exchange.
In a recent announcement, UAE Exchange has said that registered businesses in the UAE can now use the Exchange services for making payments of their pending value added tax (VAT).
The service will be provided by all the 150 branches of UAE Exchange located across the Gulf region. Any registered taxpayer with a valid GIBAN account number and a tax registration number (TRN) can use the service for making payments of taxes. Read More
Tax Credit Note is one of the VAT invoices that a registered taxpayer issues to customers in specific conditions. In this article, we will learn more about the eligibility, conditions, and format of Tax Credit Note.
The VAT rules of GCC make it compulsory for registered taxpayers to attach proper VAT invoices for all their sales and purchases. The FTA has already prescribed formats for tax invoices, debit/credit notes and other tax-related documents to be used by businesses in the UAE. Read More
While answering questions about various VAT related issues, FTA on Wednesday said that the recently introduced VAT reverse charge mechanism on precious items such as gold and diamond is only applicable to commercial transactions/trading of these items between registered dealers.
VAT on Gold and Diamonds in UAE
Supplies by a registered VAT dealer to another registered dealer
As per the VAT rule, registered dealers trading in gold and diamonds and/or products made of these metals shall not charge VAT on supplies made to other registered merchants, as long as the recipient intends to use the inputs for manufacturing of gold/diamond products or to resell further. The tax in such cases will be paid by the registered recipient on the reverse charge basis. Read More