FTA Tax Consultants Meeting
The Federal Tax Authority had issued a clarification on 29th January, 2018 after conducting a meeting with a group of tax consultants in the UAE. The following clarifications were thus issued :
VAT on realty in Designated Zones
20 designated zones across UAE with seven in Dubai, 3 each in Abu Dhabi and Ras Al Khaimah, 2 each in Sharjah, Fujairah, Umm Al Quwain and one in Ajman were announced by the FTA earlier this month.
As per the latest clarification issued by the FTA at a meeting with a group of tax consultants in the UAE, sale and lease of both commercial and residential properties in designated zones will be outside the scope of VAT. The payment of 5% VAT on the purchase of commercial property in the non designated zones can thus be made directly by the buyer to FTA and the commercial property would also get legally transferred to the buyer’s name once he has made VAT payment to FTA. .
Owner associations to register for VAT
Owners association operating independently from the developer or property management companies are required to registered for VAT as most of the owner associations have not yet registered. The home owners associations are considered to be taxable supply and are subject to standard rate since most of the home owner’s associations enter into agreement with the third parties in order to provide maintenance services and charge tenants.
Tax registration number cannot be used for personal purposes
In case an individual is registered for VAT for income in his personal capacity such as commercial rents, he cannot use his own tax registration number for business purposes and similarly business TRN cannot be used for personal purposes.
First VAT Return Filing
Extension with regard to the first VAT return filing has not been granted to the companies but to small and medium enterprises. Under the current staggered mechanism, the first return filing period for the SME’s would either be 3 months ending on 31st March, 2018 , 4 months ending on April 30, 2018 or 5 months ending on May 31, 2018 and quarterly thereafter. For the large groups, the tax period is monthly and they are required to file their first VAT return for the month ending January 31, 2018.
Branches of Foreign Companies to Claim Input Tax Credit or Refund of VAT
The branches of foreign companies that are not making taxable supplies in the UAE would be eligible to claim input tax credit or refund of VAT that they pay on the expenses which they incur in the UAE that is subject to the fulfillment of certain conditions and criterion.
Payment of Tax
At the moment, payment of tax can only be made to the FTA either through an e dirham card that only has a nominal charge of Dh 3 per transaction or either through corporate debit and credit cards. In case of corporate debit and credit cards the banks would charge a fee of 2% or more of the transaction value plus the VAT on such fee.