Protect Your Right to Claim VAT on Contracts Signed before End of Year 2017
December 13, 2017
The UAE have announced that the value added tax will become effective on 01 January 2018 starting from 0700 hours (“Effective Date”).
Many clients have signed contracts prior to the Effective Date of the VAT that did not provide for a clause that deals with the VAT. So, the question arises, do we lose the right to claim VAT and hence incur a loss of 5% on the revenue which could be much higher in terms of profit?
Not so fast…The UAE Cabinet Decision no. (52) Of 2017 on the Executive Regulations of the Federal Decree-Law no (8) of 2017 on VAT stipulates that you can claim VAT in contracts signed prior to the Effective Date but the supply under the contract is wholly or partly made after the effective date if two conditions are available:
- Where the recipient of goods or services (“Recipient”) is a Registrant.
- Where the Recipient has the right to recover Input VAT incurred on the supply either in full or in part.
However, to avail yourself of this benefit, you should, before the Effective Date, request from the Recipient to confirm the following:
- Whether the Recipient is or expects to be a Registrant at the time the Decree-Law comes into effect.
- The extent to which the Recipient expects to be able to recover Tax incurred on the supply.
So, what are you still waiting for…run and send the notice.
The UAE have announced that the value added tax will become effective on 01 January 2018 starting from 0700 hours (“Effective Date”).
Many clients have signed contracts prior to the Effective Date of the VAT that did not provide for a clause that deals with the VAT. So, the question arises, do we lose the right to claim VAT and hence incur a loss of 5% on the revenue which could be much higher in terms of profit?
Not so fast…The UAE Cabinet Decision no. (52) Of 2017 on the Executive Regulations of the Federal Decree-Law no (8) of 2017 on VAT stipulates that you can claim VAT in contracts signed prior to the Effective Date but the supply under the contract is wholly or partly made after the effective date if two conditions are available:
- Where the recipient of goods or services (“Recipient”) is a Registrant.
- Where the Recipient has the right to recover Input VAT incurred on the supply either in full or in part.
However, to avail yourself of this benefit, you should, before the Effective Date, request from the Recipient to confirm the following:
- Whether the Recipient is or expects to be a Registrant at the time the Decree-Law comes into effect.
- The extent to which the Recipient expects to be able to recover Tax incurred on the supply.
So, what are you still waiting for…run and send the notice.
“Contents of this article are for general informational purposes only. It is not intended as professional counsel and should not be used as such.”
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