SKP Group
UAE VAT update: Highlights of the clarifications issued by Federal Tax Authorities during the meeting held on 1 March 2018

The Federal Tax Authorities (FTA) had recently organised a seminar wherein following points were discussed:
  • Subcontracted transportation services: It was shared that the zero-rated or exempt treatment may apply to supplies made by the sub-contractor provided the law does not specifically provide for zero rating to the principal supplier. However, in cases of zero-rated transactions, basis appropriate contractual and other documents, the supplier should be able to substantiate the position adopted. 
  • Date of supply for real estate: VAT liability is due at the earliest of the date of receipt of payment or date of title transfer. In case of multiple payments against a single supply, the tax is triggered at the earliest of the applicable events. 
  • Healthcare services: For zero rating of healthcare services, it must be accepted in the medical profession as being necessary for the treatment of the recipient of the supply including preventive treatment. Accordingly, in case of business to business supply of services to healthcare (for e.g laboratory testing, visiting doctor, etc), depending on contractual agreements, the recipient of supply may not be the patient. Hence it is unlikely to fall within the definition of Healthcare services. 
  • Goods within the meaning of ‘Medications’ or ‘Medical Treatment’: In order to qualify as ‘Medications’ or ‘Medical Treatment’ as under Cabinet Decision No. 56 of 2017, the goods must be registered with MOHAP (Ministry of Health and Prevention) or imported with its permission and meet the definition of ‘Medications’ or ‘Medical Treatment’ in order to qualify as zero-rating. Both the conditions cumulatively must be satisfied. 
  • Reverse charge where the supplier has UAE Branch: Reverse charge applies when a UAE taxable person imports goods/services from a person who does not have a place of residence in the UAE. In the case where the supplier has a UAE Branch, the place of residence is the place ‘most closely related to the supply’. In case the facts indicate that the overseas Head office is more closely related to the supply, the reverse charge shall apply as the supplier is considered non-resident for the transaction. 
  • Supply of goods in Designated Zone (DZ): By default, the supply of goods within DZ is outside the scope of VAT. As an exception, goods supplied in a DZ to be used/consumed by the purchaser may be liable to VAT. The term ‘use’ should be interpreted as utilisation, application, employment, deployment or exploitation of goods. It does not include the sale of goods. An exception shall not apply where the goods are used in production or sale of another good in DZ provided there is a direct connection with the new good e.g affixing, attaching, or otherwise affecting it. 
  • Issuance of Tax invoice by an Agent: A VAT registered agent can issue tax invoice on behalf of a taxable person with agent’s details. Such an invoice shall be considered to have been issued by the principal taxable person and it shall be the responsibility of the principal to account for VAT for such supply.
  • Summary Tax invoices: Summary tax invoices relating a particular calendar are acceptable provided they are dated to be from the same calendar month for which they are issued. 
  • Exhibitions, conferences and performances: Place of supply is where the event takes place. Accordingly, where an event takes place in UAE, place of supply shall be within UAE. Furthermore, even non-resident organisers would be required to register for VAT. It is pertinent to note that non-resident businesses are not eligible for the VAT registration threshold. 
  • Action in Pipeline by FTA: FTA may release a few guidance notes on key issues.
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