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CHECKLIST for TAX INVOICE – as per UAE VAT LAW

Each and every Tax Invoice issued by the VAT registered businesses must contain certain mandatory details. This checklist will be useful for all registered suppliers to issue accurate and FTA compliant Tax Invoices. This will also be useful for registered recipients of supply to ensure that the Tax Invoices received are competent for the Input Tax recovery. The words ‘Tax Invoice’ should be clearly displayed Name, address and TRN of the supplier Name, address and TRN of the recipient A sequential Tax Invoice number which must be unique number which enables identification of the Tax Invoice and the order of the Tax Invoice in any sequence of invoices Date of issuing the Tax Invoice Date of supply, if different from the date of issue of the Tax Invoice Description of the goods or services supplied For each good or service, the unit price, quantity or volume supplied, rate of tax and amount payable in AED should be given Amount of discount given, if any The gross amount payable in AED Where the currency is converted from a currency other than UAE Dirham, the Tax amount payable in AED along with the rate of exchange applied should be mentioned Where the supply is to another GCC VAT implementing State, the following details are required: a) The TRN of the recipient in the other state b) A statement identifying the supply as between UAE and the VAT implementing State Where the supply is a wholly Zero-rated supply, a Tax Invoice is not required to be issued, if there are or will be sufficient records to establish the particulars of the supply. A Tax Invoice can be issued by electronic means provided: a) The supplier should be capable of securely storing a copy of the electronic Tax Invoice according to the record keeping requirements b) The authenticity of origin and integrity of content of the electronic Tax Invoice should be guaranteed. #VAT #VATinUAE #VATinDubai #DubaiBusiness #DubaiVAT #DubaiTax #AuditFirmsinDubai #DubaiAudit #Auditing #Accounting #Accounting&Bookkeeping #CharteredAccountant #CharteredAccountantFirms #FTA #FederalTaxAuthority #UAE #Freezones #Excise #BusinessBay #Sharjah #AbuDhabi #TAXinDubai #TaxinUAE #ReverseChargeMechanism #JabalAliPort #DesignatedZones #VATRefund #VATReclaim #TaxInvoiceChecklist #VATInvoice #ZeroRated Legal Disclaimer: The above guideline has been published for information purposes only; for a full overview please refer to www.tax.gov.ae. For detailed discussion and professional advice, feel free to contact us www.hmaa.ae.

The scope of Excisable goods has expanded across the Kingdom

The scope of Excise Tax in The Kingdom of Saudi Arabia (KSA) has expanded and the changes will be implemented with effect from 1 December 2019. Is your business ready to go live?

These amendments to the KSA Excise Tax regulations have increased the scope to include the following Excise goods categories:

  • Sweetened drinks;
  • E-cigarettes; and
  • E-cigarettes’ liquids.

If not already registered for Excise Tax, businesses which import, manufacture, or stockpile the above goods in KSA will need to register for Excise Tax before 1 December 2019. 

If already registered for Excise Tax in KSA, businesses will need to determine whether their products, such as sweetened drinks, fall within the definitions of the revised scope – even where no ongoing obligation to register for Excise Tax exists, some businesses with existing stock of these products may be required to file a one-off return following the 1 December implementation date. 

It is crucial that businesses associated with Excisable goods in KSA understand the new compliance obligations. Procedures should be assessed, and where necessary redesigned to support the accuracy of the reporting requirements and Excise Tax filing.

FTA publishes Excise Tax Public Clarification on stockpiling of Excise goods

The United Arab Emirates (UAE) Federal Tax Authority (FTA) has published Excise Tax Public Clarification EXTP003 on stockpiling of Excise goods.

Who is this information intended for?

Businesses in the UAE which hold stock of Excise goods or expect to hold stock of Excise goods on 1 December 2019.

Overview

EXTP003 explains the Excise Tax obligations for businesses which expect to hold stock of the following Excise goods for business purposes on 1 December 2019 (the date of expansion of the UAE Excise Tax regime):

  • Sweetened drinks;
  • Electronic smoking devices and tools;
  • Liquids used in electronic smoking devices and tools; and
  • Tobacco products which have been subject to Excise Tax at a price lower than the minimum Excise Price introduced on such products by Cabinet Decision No. 55 of 2019 on the Excise Price for Tobacco Products.

EXTP003 provides guidance that is more detailed than previously available regarding stockpiling of Excise goods. It provides valuable insight into the FTA’s approach and expectations in terms of business’ Excise Tax accounting and reporting obligations.

As the new guidance makes clear, any business which holds stock of the above products could potentially be considered a stockpiler for Excise purposes and be subject to Excise compliance requirements (and penalties for lack of compliance).

Any business holding stock of the above products is required to perform a complex two-stage stock- and sales-based calculation on every individual product type within each category of Excise goods. For example, orange juice under the category of sweetened drinks must be calculated separately from apple juice also under the category of sweetened drinks.

Further, such businesses are required to keep records audited by an external third party which show the quantity of Excise goods for the 12-month period prior to 1 December 2019. The results of the required calculations and audit could result in a liability to register for Excise Tax, even where there are no other ongoing Excise obligations.

For a detailed overview of the new Public Clarification, please refer to the attached Deloitte summary.

Tax Year End adjustments

The deadline for submitting Tax Year End Input Tax Annual Adjustments and Capital Assets Scheme adjustments is approaching for businesses submitting monthly Value Added Tax (VAT) returns in the United Arab Emirates (UAE). The adjustments must be shown in the tax period covering January 2020, due for submission by 28 February 2020.

Businesses submitting quarterly VAT returns should also start preparing their calculations, for submission in the tax return covering the first tax period following their Tax Year End.

Who Is This Alert For?

Any Business that is making both taxable and exempt supplies in the UAE and any Business that owns a Capital Asset for VAT purposes. More specifically, we would expect this alert will be of particular interest to those Businesses which have a Tax Year End of 31 December 2019.

  • At the end of its tax year, the Business is required to compute and make the following input tax adjustments for the year
  • Annual Adjustment (wash-up)
  • Adjustment for “Actual-use” (where the standard method was used for apportionment during the tax year)
  • Capital Asset Scheme adjustment

The above adjustments should be reported in the VAT return relating to the first tax period following the Tax Year End.

Input Tax Apportionment

A Business is entitled to recover input tax incurred on goods and services that are used or are intended to be used for making taxable supplies.

Accordingly, where purchases are directly connected to exempt supplies or non-Business activities, then the input tax is not recoverable.

Any Business which incurs input tax for making both taxable and non-taxable supplies (known as “residual input tax”) is required to calculate the proportion of input tax it is eligible. This is known as Input Tax Apportionment. Provisional Input Tax Apportionment calculations are required to be made during the year, which must then be revised based on annual figures at the Tax Year End. Detailed methodologies are specified for this purpose, and an overview of these rules are provided at the end of this alert.

Businesses which make a mixture of taxable and exempt supplies should ensure they are prepared with the necessary data to complete these detailed calculations in time to include the relevant adjustment in the VAT return for the first tax period following the Tax Year End.

Capital Assets Scheme

Many Businesses fail to note the connection between the input tax apportionment annual adjustment and the requirement to complete a Capital Assets Scheme adjustment. The two are interconnected and due to be made at the same time each year, which applies to assets of a certain value and on which VAT was incurred on purchase.

Given that VAT was introduced on 1 January 2018, many Businesses are facing their first requirement to calculate a Capital Assets Scheme adjustment this year.

When a Business acquires or constructs a capital asset, the input tax is recoverable in the year of acquisition, subject to the input tax apportionment rate mentioned above.

However, given the long useful life of large value assets, Businesses are required to monitor the usage of the capital assets for taxable purposes over time. This results in yearly adjustments to the original input tax recovery being due for the useful life of the asset.

Additional Information

Input Tax Apportionment

i. Provisional Input Tax Apportionment

The amount of residual input tax that is recoverable during the course of the Tax year will be calculated based on either:

  • The prescribed calculation in Article 55 of the VAT Executive Regulations (Standard Method)
  • Where the Federal Tax Authority (FTA) has approved one of the special methods to be used by the business, as provided by the FTA in its ITA Guide VATGIT1 (revised on 31 December 2019), then this method is to be used

The above calculation has to be performed at the end of each VAT period. The input tax recovered will be provisional and subject to an annual adjustment at the Tax Year End.

ii. Annual Adjustment (wash-up)

At the end of the Tax Year, the Business must revise its provisional input tax apportionment calculations and perform the calculation on an annual basis, in order to compute the actual input tax it was eligible to recover during the year. The result of the annual calculation is compared to the provisional input tax recovery made throughout the year – where there is a difference in the input tax recoverable by the Business an adjustment must be made – “the annual adjustment”. This could result in either additional input tax recovery for the Business, or lead to an additional payment of VAT being due back to the FTA.

The annual input tax apportionment method should also be consistent with the method used as per (i).

This practice is also known as the “Annual Wash-up” and there is no threshold for the adjustment.

Any Business that uses an FTA approved Special Method should also compare the result of the annual recovery rate with the proposed rate at the time of application for the Special Method. Should the difference be more than 10%, the Business must notify the FTA of the difference.

iii. Adjustment For “Actual Use”

Any Business using the Standard Method in (i) should also re-compute its recoverable portion of the residual input tax on an annual basis based on an appropriate “use-based method”, which in practice must be one of the Special Methods outlined in VATGIT1 (revised on 31 December 2019). The method selected for comparison should represent the actual use of the goods or services purchased for either taxable or exempt purposes.

If the comparison to the actual use calculation results in a difference of AED 250,000 in input tax recovery when compared to the result of the annual wash up calculation, the Business must use the actual use calculation as the basis for calculating the annual adjustment due.

Capital Asset Scheme

i. Definition of Capital Asset

Article 57 of Executive Regulations of VAT defines a Capital Asset as a single item of expenditure of the Business amounting to AED 5,000,000 or more excluding VAT, on which VAT is payable and has estimated useful life equal or longer than:

- 10 years for a building or parts thereof; or
- 5 years for other capital assets.

Notwithstanding the above, expenditure consisting of smaller sums which collectively amount to AED 5,000,000 or can be treated as a single item in certain cases.

ii. Capital Asset Adjustments

Under Article 58 of the VAT Executive Regulations, the Business should monitor the input tax recovered and make adjustments over the relevant adjustment period.

The Capital Asset Adjustment will depend on the extent the Business used the capital asset for taxable purposes during the tax year. This could result in an adjustment being required in the VAT return of either additional recoverable input tax, or a reduction in the input tax previously claimed.

iii. Record-keeping requirements

Article 60 of the VAT Decree-Law requires any Business to keep a record (i.e. a Capital Asset Register) related to all Capital Assets for VAT purposes for a minimum of 10 years.

This requirement applies to all Businesses owning assets meeting the definition of a Capital Asset for VAT purposes, irrespective of whether the business makes exempt or non-business supplies.

How Can We Help?

Deloitte has dedicated teams of highly experienced VAT specialists in all of the industry sectors effected by Input Tax Apportionment and the Capital Asset Scheme in the UAE.

We can assist with calculating Input Tax Apportionment annual adjustments, assessing the suitability of Special Methods, supporting with Special Method applications, calculating Capital Asset Scheme Adjustments, and reviewing suitability of Capital Asset Registers. This includes the deployment of specialist proprietary technology for this purpose.
 

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