Summary of Transition Rules:
VAT is effective from 1st January 2018 in the UAE though transactions will be in pipeline for the businesses as payment received or supplies done before effective date. Some of the key transitional rules to be as follows:
Rental contracts span after 1.1.18 will be subject to VAT for the Rentals related to the period after 1.1.18.
Contract entered prior to 31.12.17 for supply made wholly/ partly after 1.1.18 – VAT will be due on supplies made post 1.1.18.
If contract is silent on the VAT, value of supply stated in the contract shall be treated as inclusive of VAT.
However, if recipient of supplies is registered for VAT and is entitled to ITC, supplier business can treat the contract price exclusive of VAT and can charge VAT in addition to the price.
In case if Invoice issued/ Payment received prior to the date of VAT Law comes in to effect, value of the Payment/Invoice will be subject to VAT if following takes place after the date of VAT Law comes in to effect:
Supply of goods/ Transfer of goods under the supplier’s supervision/ Goods are placed in the possession of the recipient/ acceptance of recipient
Completion of assembly
Issuance of Custom Declaration
The customer accepts the supply of goods
Detailed Transitional Rules as per Article 70 of Executive Regulations of the UAE VAT Law
1. For the purposes of paragraph (e) of Clause (1) of Article (80) of the Decree-Law, “acceptance by the Recipient of Goods” means the point at which the Recipient of Goods considers that the Supplier has completed his obligations to him.
2. Where Clause (1) of Article (80) of the Decree-Law applies, the Date of Supply shall be the effective date of the Decree-Law only in respect of the amounts of Consideration received or specified in the invoice issued before the Decree-Law came into
3. In the case of Clause (3) of Article (80) of the Decree-Law, a supply shall be considered to have taken place in accordance with the following provisions:
i. For supplies to which Article (25) of the Decree-Law applies, the Date of Supply shall be determined in accordance with Clauses (1) to (6) of that
ii. For supplies to which Article (26) of the Decree-Law applies, the supply shall be treated as taking place in accordance with the rules in that
4. For the purpose of Clause (3) of this Article, where the Date of Supply has been triggered in respect of a supply of a Good or a Service and the part of the supply of such Good or Service was before the Decree- Law coming into effect and partly after, the Date of Supply shall be treated as taking place after the Decree- Law comes into effect for that part of the supply actually taking place after that.
5. A payment of Consideration before the date the Decree-Law comes into effect shall be disregarded in determining whether a supply takes place before that date if, or to the extent that, it appears to the Authority that it would not have been so made but for the
6. In the case of Clause (3) of Article (80) of the Decree-Law, the Consideration shall be treated as exclusive of Tax and the Recipient of Goods or Recipient of Services shall be obligated to pay the VAT in addition to the Consideration if all of the following conditions are met:
1. Where the Recipient of Goods or Recipient of Services is a
2. Where the Recipient of Goods or Recipient of Services has the right to recover Input Tax incurred on the supply either in full or in
7. Clause (6) of this Article shall only apply if, before the date the Decree-Law comes into effect, the supplier requests from the Recipient of Goods or Recipient of Services to confirm the following:
1. Whether the Recipient of Goods or Recipient of Services is or expects to be a Registrant at the time the Decree-Law comes into
2. The extent to which the Recipient of Goods or Recipient of Services expects to be able to recover Tax incurred on the
8. Within 20 business days of receiving an information request under Clause (7) of this Article, the Recipient of Goods or Recipient of Services shall reply to the supplier in writing with the information
9. The supplier may rely on the information provided as required by Clause (8) of this Article in determining the tax treatment of the If the Recipient of Goods or Recipient of Services knowingly provides incorrect information that results in the Supplier having to treat the Consideration as inclusive of Tax, then the Recipient of Goods or Recipient of Services shall not be entitled to reclaim the Input Tax on that supply.
10. Where the Recipient of Goods or Recipient of Services has failed to provide the information in accordance with Clause (8) of this Article, the supplier may treat Consideration in respect of the supply as exclusive of Tax, and request the Recipient of Goods or Recipient of Services to pay
11. The supplier and the Recipient of Goods or Recipient of Services shall both retain the records of the request made under Clause (7) of this Article and the information provided under Clause (8) of this Article.
12. For the purposes of Clause (6) of this Article, where the Recipient of Goods or Recipient of Services ascertained that he can only recover Input Tax in part, the consideration for the supplies under the contract shall be treated as exclusive of Tax only to the extent of the Input Tax recovery percentage that the Recipient of Goods or Recipient of Services discloses to the Supplier under Clause (8), and the remaining portion of the consideration relating to the Supply should be treated as Tax
13. In all cases, the Supplier shall remain responsible for calculation of Tax and payment to the
14. Where a Taxable Supply is treated as periodically or successively supplied, Tax shall not be charged on the portion of the Consideration that relates to a supply made before the date the Decree-Law comes into
15. A GCC State shall be treated as an Implementing State according to the provisions of the Decree-Law and this Decision if the following conditions are met:
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Do you think CBDT should extend Tax Audit Report and relevant ITR Due Date? Please Comment, Vote, Retweet and Like.— Tax Guru (@taxguru_in) September 18, 2018