UAE's FTA clarifies pre-January VAT payment

Suppliers will be liable for VAT if the amount received is inclusive of VAT or if the contract issued to the consumer does not refer to the tax

Consumers are responsible for paying value-added tax (VAT) on goods and services contracted before VAT’s implementation but slated for full or partial delivery in 2018 only if the contract issued before January 1 states that the amount due is inclusive of tax, the UAE’s Federal Tax Authority (FTA) has clarified.

In a statement, the FTA noted that suppliers will be liable for VAT in two distinct scenarios, such as when the contract states that the amount received against the good or service is inclusive of VAT, and cases in which the contract issued to the consumer did not refer to VAT.

In the latter case, if the recipient is registered for VAT, the amount is to be treated as exclusive of tax, and the supplier would have needed to ascertain whether the recipient is registered and the recipient ability to recover tax as per the regulations.

The FTA statement noted that, in all cases, the supplier remains liable for accounting and paying the VAT.

Last week, the FTA approved a plan to exempt businesses that are late in registering for VAT from administrative penalties until April 30. The deadline for registration passed on February 28.