Ions have clarified things, but grey areas remain
d UAE or vice-versa from a comon-designated zone or in mainmpany or person in designated upplies will be subject to VAT. utive Regulations have not claril aspects of how the VAT has to n case of supply of goods by a n in a designated zone to a comnon-designated zone or in mainclarification on these procedural ted. or, there are no grey areas as such, on of “public broadcast” as the services in the Executive Regulad-based like broadband or 4G. areas or transactions that require e retail industry related to selling om the retail store, exchange or consumer purchases an item for ber 30, 2017, and exchanges Dh120 by paying differential ry 2, 2018, will he or she be e full Dh120? Similarly, if goods o December 31 but delivery is ill VAT be paid on the invoice rate invoice for the VAT amount w will VAT apply if a supermarket is also selling generic drugs, which are exempted; can they also sell them as VAT-exempt as they will not typically have the licence of selling drugs of generic nature? On real estate, the grey area is that whether labour accommodations will be considered as residential use (based on ultimate use) and exempted, or this will be treated as a commercial transaction. Furthermore on lease rent, on which such labour accommodations are built, will this still be commercial and likely to be subject to VAT or should this be lease of bare land and thus exempt?
In addition, the apportionment of input tax credit for real estate players who are renting out mixed use properties — since they will avail services for building as a whole and at that time it’s not possible to allocate whether this input tax is for exempt services or taxable — therefore, it should be allowed to allocate this on output basis (in proportion of rental earned for residential and commercial spaces or in proportion of area under each usage). This choice should be given to them on an automatic basis; today, they need to apply to the FTA to adopt these methods and justify. Until such time approval from the FTA is received there will be considerable loss of input credits on this account.
Another point is that whether a landlord of a residential building who gives the entire building on lease to large players to further manage and they in turn lease for residential purposes: whether the first transaction is commercial and hence subject to VAT or both will be regarded as residential and thus zero rated or exempted. There is a practice of trading in gold on an unfixed basis (where the gold rate is not fixed at the time of trade but is fixed in future); under the coming VAT regime, it’s not possible to conduct trade like that.
Gold and jewellery players used to trade in gold (which is not bullion) on a barter basis’ such practices may not continue. Gold and diamond groups had requested that in case of jewellery made on order — where bullion is accepted as consideration for gold in jewellery — they should be allowed to only show making charges as revenue. But no such directions are still contained in the Executive Regulations.
Moreover, prices of gold fluctuate every day and hence the display of prices on products that are inclusive of tax will be difficult for this sector. They are currently linked to fixed prices that are fixed each day. But to tag that on each product will be a challenge.
Also, other than buying precious ornaments, this sector gets many customers who want to exchange their ornaments for a new design or have some work done on it or just an exchange of other jewellery. The question here arises is whether the exchange of jewellery has to be treated as a single transaction or are two separate purchases and sale transactions. Analysed by Mayank Sawhney of MaxGrowth Consulting, Nirav Shah of Fame Advsiory, Hemant Mundhra of Slant Agency, Juzar Chati of Kaid Auditing; Anish Mehta of ICAI Dubai Chapter. Q: will there be any special schemes for smes? A: No special rules are planned for SMEs. However, the FTA will provide materials and resources available for these entities to assist them in their enquiries. Q: will there be VAT grouping? A: Businesses that satisfy certain requirements covered under the legislation (such as being resident in the UAE and being related/associated parties) will be able to register as a VAT group. For some businesses, VAT grouping will be a useful tool that would simplify accounting for VAT. Q: How quickly will refunds be released? A: Refunds will be made after the receipt of the application and subject to verification checks, with a particular focus on avoiding fraud. Q: will goods exempt from customs duties also be exempt? A: Not necessarily. Some goods that are imported may be exempt from customs duties but subject to VAT.