Got a question on consumer issues? Want more clarity on VAT, looking to clear your doubts on consumer rights or need advice on a lingering complaint?
Gulf News’ panel of experts have your queries sorted – from gym memberships to warehouse procurement and everything in between.
Question: Will I have to pay VAT on gym membership?
“In the January 2nd edition of Gulf News you have said that if someone has paid their gym membership in advance they do not have to pay VAT on it. But my gym has asked me to pay VAT on the remainder months of my membership even though I paid for a year’s membership in advance in September 2017. Could you please help me to understand if they are right or wrong.” — Tayibba Shaikh
The tax liability will depend on certain conditions.
According to Naveen Sharma, the chairman of Institute of Chartered Accountants of India, Dubai chapter: if the contract was silent on VAT at the time of payment, then the gym owner will have to absorb the tax charges.
However, if the contract mentioned of any tax liability in September 2017, then the consumer will have to pay.
If it’s a corporate consumer, which is registered with the VAT authority, the gym can charge VAT and the corporate can later can recover the tax component as input credit. Also the gym should had given a notice 20 days in advance in December before the VAT came in force, Sharma told Gulf News.
If it’s a small gym with revenues less than Dh375,000, then VAT is out of the scope.
Question: Can we recover VAT on local export items?
“We procure goods from local manufacturer/suppliers and then export to Africa after filling containers with multiple goods. We are paying 5 per cent VAT on supplies received, but our customers in export destinations are not willing to pay the VAT expenses. Can we recover VAT paid on locally sourced export items?" — Shyam Singh
A number of UAE based small scale exporters are sourcing goods locally for exports. We have received a few questions on how to claim (input tax) VAT paid on locally sourced goods for exports.
Gulf News’ panel of tax experts and chartered accountants said it is not a complicated situation as exporters have recourse to claim input taxes paid on supplies sourced for exports.
“To claim the input tax refund, exporters need to register themselves with the Federal Tax Authority (FTA) and get their Tax Registration Number. They need to collect all the invoices on their local purchases and file for input tax refund,” said Dipesh Shah, a Dubai based chartered accountant.
Only a taxable person registered for VAT may recover input tax therefore registering with FTA is the starting point for input tax recovery. According to the Executive Regulations on the UAE VAT law, input tax on supplies that wholly relate to supplies as specified in Clause (1) of Article (54) of the Decree-Law made by the Taxable Person shall be recoverable in full. With exports not taxed under the VAT, tax experts say exporters can claim input tax refunds from FTA after filing the invoices as specified in the Executive regulations.
Question: Should I register for VAT for all my companies?
I have three companies with individual licences. But only the Dubai company generates revenues and the other two are essentially warehouse operations. All operating expenses are covered by the Dubai entity. My question is, should I register the two non-revenue generating companies for VAT? — Sanjay Keshup
According to Emma Cronin, General Counsel at GCP, in terms of Federal Decree Law No. (8) of 2017, an entity is required to register for VAT if the total value of its taxable supplies within the UAE exceeds the mandatory registration threshold of Dh375,000 over the previous 12-month period or if it is anticipated that the taxable supplies will exceed the threshold in the next 30 days. An entity may register voluntarily where the total value of its taxable supplies exceeds Dh187,500 as above mentioned.
In the example provided, the two non-revenue generating businesses have not had any turnover over the previous 12 months, nor are they expected to within the following 30 days. Therefore they are not required to register for VAT. However, for the purposes of VAT recovery, registration may be beneficial.
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