One basic rule we need to remember if we want to champion transitional provision and that rule is “VAT would be payable on all the taxable supplies of goods & services made on or after 1st January 2018.”
Certain instances have been enumerated in Article 80 of Federal Decree – Law No.(8) of 2017 on Value Added Tax, which deals with transitional issues and the same are discussed below:
- Supply completed on or after 1st January 2018
Wherein the supply of goods and services got completed on or after 1st Jan 2018, supplier is liable to pay VAT even if the invoice is issued prior to 1st Jan 2018 and/or consideration (in full or in part) is received prior to 1st Jan 2018.
The date of supply shall be the same as the effective date i.e. 1st Jan 2018, in the following instances, if occurred on or after 1st Jan 2018:
(a) Transfer of goods under the supervision of the supplier.
(b) Placing the goods at the recipient’s disposal.
(c) The completion of assembly or installation of goods.
(d) The issuance of the customs declaration.
(e) The acceptance by the Recipient of goods of the supply
Above position can be understood through an example, let say, Desert Dates LLC entered into an agreement with the buyer, Trading Dates LLC, to supply 10 tons of dates in April 2018, however in order to ensure commitment invoice was issued on 15th Nov 2017 and consideration was also received in Nov 2017. Now in the stated facts, as per above referred Article, date of supply would be deemed to be 1st Jan 2018 and tax would be payable accordingly in the tax return of Jan 2018.
2. Value of contract
Wherein supply is to be made on or after 1st Jan 2018 and contract got concluded prior to 1st Jan 2018, in such case value of contract shall be deemed to be inclusive of VAT.
Thus, from above it is very much clear that business enterprises operating in UAE while entering into contact even prior to 1st Jan 2018 must take into consideration VAT in pricing if supply is expected to happen post implementation of VAT law i.e. 1st Jan 2018.
The subject Decree does not through light on how revised invoices would be issued in instances mentioned Para 1, procedure to allow input tax credit to the recipient, what would be date of supply of services, in general, for supplies made post implementation date. Probably Executive Regulation to the captioned Decree would provide more clearance on these issues.
Most importantly, in light of above, it is highly recommended that business enterprises must review all their existing contracts to ensure proper compliance and whether contracts require any renegotiation or not.