Although VAT implementation in the UAE is well under way, various queries still arise in respect of the consumer experience and whether retail businesses charging VAT are entitled to do so. As consumers, it is important to have an understanding of your rights and responsibilities in the payment and collection of value added tax.
General consumer queries that continue to arise post the VAT implementation include the following.
* Are prices displayed at a supermarket inclusive of VAT?
They should be. In accordance with the executive regulations pertaining to tax exclusive prices, in the case of a taxable supply, the published price shall be inclusive of VAT.
There are only two exceptions to the above, applicable in the case of export and supply to another VAT registrant, in which case it must be specifically stated that the price displayed is exclusive of VAT.
* What are the options where a supermarket is clearly only adding VAT on prices at the till?
Advertised prices are required to be inclusive of VAT and therefore a supermarket is not permitted to adjust prices or account for VAT at the till. Where this occurs, consumers are entitled to register complaint with the Consumer Protection Division at the Department of Economic Development.
Under Federal Law, the authority is permitted to issue an administrative penalty assessment in the case of any failure by a taxable entity to display prices inclusive of VAT. Where such omissions happen, shoppers can bring their complaints to the attention of the authorities. This way, they assist in ensuring proper implementation of the law as any failure to comply may render the business subject to a fine.
* The prices displayed on an eCommerce site make no mention of VAT. Should that be a concern?
All advertised prices, but for export or marketing to registrants, are to be VAT inclusive. The responsibility to account for VAT is thus on the vendor or service provider. No mention of VAT may therefore be interpreted to already be inclusive of VAT.
Where shoppers have doubts, the Tax Invoice received following delivery of goods should correctly reflect any VAT charged and consumers are entitled to the receipt in the case of absence thereof.
* A restaurant has increased their prices by 8 per cent since the VAT implementation. Are they allowed to do this?
The Law provides that a business owner is entitled to set their own reasonable prices for goods and services except where the price is enforced by the government. However, price manipulation following implementation of VAT is taken very seriously by the authorities and therefore consumers are invited to notify the Consumer Protection Division in order that appropriate action may be taken.
* What recourse do shoppers have where they feel they are am being incorrectly charged the 5 per cent attributable to VAT?
In the event shoppers believe they are being incorrectly or unreasonably charged, they should inspect the Tax Invoice issued by the business and verify the Tax Registration Number that appears thereon. If the business is not registered for VAT, or if a TRN does not appear, they may not charge VAT and consumers should notify the authorities accordingly.
* Are tips and gratuity subject to VAT?
Where gratuity is included in the bill for services rendered, then the gratuity shall be subject to VAT. However, where the consumer provides a tip, then that amount will not be considered subject to VAT.
* Are restaurant delivery services subject to VAT?
Where a restaurant provides delivery as a complementary service, then no VAT will be chargeable. However, where there is a delivery service or fee then the provider must charge and account for 5 per cent VAT.
* Are shipping costs subject to VAT?
Within the UAE courier services and shipping costs are to be inclusive of VAT.
* How is VAT applied if a shopper makes use of a discount or a voucher?
Where the purchase is subject to discount, VAT should only be payable against the discounted price. Where a voucher is used to redeem an item or service for free, then no VAT will be chargeable.
* Are subscriptions subject to VAT?
All subscriptions accrued VAT from January 1, 2018.
— The writer is General Counsel at GCP Group.