UAE: When to report supply of Goods in VAT return

goods transport

When to report supply in VAT return? or say what is time of supply? or say what is date of supply? is very important concept and milestone which determines time period in which liability to pay tax to the tax authority arises i.e. when you would be required to pay tax to the Government.

A. Date of supply in case of goods – normal course

Earliest of:

  1. The date on which Goods were transferred, if such transfer was under the supervision of the supplier.
  2. The date on which the Recipient of Goods took possession of the Goods, if the transfer was not supervised by the supplier.
  3. Date of receipt of payment, or
  4. Date of receipt of invoice.

Let me try to explain this by way of few example – [Please note that for various examples in the blog, I have assumed tax period is ” quarter”]

Example 1: XYZ LLC sold goods amounting to AED 10,000 to ABC LLC on 15th Jan 2018 and raised the tax invoice accordingly. And, XYZ LLC received payment from ABC LLC only in the month of May 2018. In the current example, though the receive of payment is in the 2nd quarter, but as invoicing and also delivery of goods was done in 1st quarter, XYZ LLC would be required to pay tax due on such supply on or before due date of return for 1st quarter.

Example 2: XYZ LLC, company registered in Dubai, UAE, sold goods amounting to AED 10,000 to ABC LLC on 15th April 2018 and raised the tax invoice accordingly. But as XYZ LLC takes 100% payment on advance basis, it received amount equivalent to sale value on 26th March 2018 from ABC LLC. In this example, though the actual supply was made in the 2nd quarter, however for VAT purposes, date of supply would be 26th March 2018 and accordingly XYZ LLC would be required to pay tax due on such supply on or before due date of return for 1st quarter.

 B. Date of supply in case of goods –  Goods supplied with Assembly/ Installation of Goods

Earliest of:

  1. The date on which the assembly or installation of the Goods was completed.
  2. Date of receipt of payment, or
  3. Date of receipt of invoice.

Example 3: XYZ LLC, company registered in Abu Dhabi, UAE, entered into a contract to supply and install cement plant to AED 10 million to Dunes LLC on 15th April 2018, the same would be to installed at client site in Sharjah. Further it was expected that contract would run for around 3 months and accordingly installation got completed on 29th June 2018. XYZ LLC raised invoice on 1st July 2018 and received payment for the contract on 15th July 2018.  In this example, the installation got completed in 2nd quarter i.e. 29th June 2018 however invoice was raised on 1st July 2018 and payment was received on 15th July 2018 – the earliest is completion of supply and thus date of supply would be 29th June 2018 and accordingly for VAT purposes taxes will become due along with the tax return of 2nd quarter and not 3rd quarter wherein invoice was raised or payment received.

 C. Date of supply in case of imported goods

The date on which the Goods are Imported under the Customs Legislation.

 D. Date of supply in case of goods –  Goods supplied on returnable basis

Earliest of:

  1. The date on which the Recipient of Goods accepted the supply
  2. a date no later than (12) months after the date on which the Goods were transferred or placed under the Recipient of Goods disposal

Example 4: Arab Heights LLC , company based out of Dubai, supplied health related goods to various distributors on returnable basis in the January 2018. for 40% of the supply made, approval was received within 1st quarter only. For 20% of the supply made in January 2018, approval was received in 2nd quarter. For 15% of the supply made in January 2018, approval was received in 3rd quarter. For 10% of the supply made in January 2018, approval was received in 4th quarter, and for balance 15% of the supply approval was received only in April 2019.

In the above case supply would be recognised in the quarterly return as approval received, however for the approval received in April 2019, supply should be recognised in 1st quarter of 2019.

 E. Date of supply in case of goods –  contract includes periodic payment 

The date of supply of Goods for contract that includes periodic payments or consecutive invoices shall be the earliest of any of the following dates, provided that it does not exceed one year from the date of the provision of such Goods:
a. The date of issuance of any Tax Invoice.
b. The date payment is due as shown on the Tax Invoice.
c. The date of receipt of payment.

Example 5: Monster Power Machines LLC, Abu Dhabi based company, supplied machinery to Desert Power LLC in March 2018. Billing would be spread over 10 equal installments and first bill to be raised in March 2018 only. In this example, tax would be due based on issuance of each invoice and would be payable quarterly.

 

Hope the above would be useful to you.

Regards

 

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