What are the rules for additional charges on mobile top-up cards?

Q I purchase top-up cards for my mobile phone and find it confusing that sometimes I am charged VAT on the amount I pay and sometimes my receipt shows no VAT. For example, if I buy a Dh100

top-up card from the mobile provider, there is no VAT. If I buy the same Dh100 topup from another store, I am always charged Dh5 VAT. Which is correct? FS, Fujairah

AI see a lot of inconsistencies with how mobile phone topup cards are treated for VAT purposes.

The VAT treatment of these are covered under Article 40 of the Decree Law and Article 28 of the Executive Regulations. If you are purchasing a topup card for a specified value which you can then use at a later date to obtain a number of different services from your mobile provider, this should not have VAT added at the point of purchase. You are simply exchanging cash for credit with the mobile provider

and this is not a taxable supply as per the VAT legislation. VAT should be accounted for by the service provider when you use the credit and purchase specific mobile services.

Supermarkets tend to get this wrong and will often charge you VAT on the amount of the top-up purchased. You will then pay VAT again when you use the credit.

However, if you purchase a specific service or add-on, for example you buy 60 minutes of additional calls to use in the next month, then you should be charged VAT at the point of purchase as this is a taxable supply of a specific service.

To avoid the risk of paying double VAT, I suggest you buy top-ups directly from the mobile provider.

I run a recruitment consultancy and recently placed a candidate in Bahrain. The role is working for a long-standing UAE client who established a subsidiary in Bahrain. I have been asked to invoice the UAE client for my services. What is the VAT treatment for this placement? Can my service be classified as an export, and therefore be exempt of any VAT? BL, Dubai

To understand the relevant VAT treatment of recruitment services for candidates based overseas you need to look at Article 31 of the Executive Regulations to the Decree Law. The basic rule for the supply of services is that the “place of supply” is where the service provider is located. However, there are exceptions.

As a recruiter, all of your sales transactions will either be zero-rated or standard-rated. Supplies which are exempt from VAT are specifically listed in the Decree Law and are only for certain financial services, certain residential buildings, supply of bare land and local passenger transport. Therefore, you do not qualify for an exempt VAT code under those conditions.

For a service to be rated as an export, and therefore taxable at 0 per cent rather than the standard 5 per cent, the service must be provided to a recipient whose place of business is outside of the UAE and the recipient must be outside of the country when the service is delivered. Obviously, your recruitment services are not in these restricted categories. So typically your services to a company located outside of the UAE will be classed as an export and taxed at 0 per cent.

This example, however, is complicated by the fact that you have a contract in place with the UAE client and are invoicing the company here. I recommend that in future you have an agreement in place with the Bahraini company and invoice them directly.

Lisa Martin, a chartered accountant with more than 20 years of commercial finance experience, is the founder of accounting, auditing and VAT consultancy, The Counting House. Email any VAT queries to pf@thenational.ae