For UAE’s contractors, when they get VAT refunds is getting to be as important as the amounts involved.
“As a main contractor, I will have to pay all the VAT-related costs to the subcontractor or supplier,” said K.A. Siddiqui, Partner at Dubai Walls Construction. “It automatically becomes part of the LPO (local purchase order). There can’t be any delay on our part because any delay will invite penalties and becomes a criminal offence.
“The second I invoice something, I have to pay up … whether the client had paid me or not.”
Which is why contractors are now insisting on clients and project promoters to, in turn, shorten the payment cycles in releasing funds due to them.
“Where possible, we insist on a monthly settlement cycle with the client — if for any reason a project gets stuck, it will be the contractor who gets exposed in the market,” Siddiqui added. “And if for any reason projects and payments are stuck, we can take corrective measures when in a monthly cycle.
“Because if a cheque bounces, it will be the contractor who will feel the pain the most. This is why the construction sector needs to see faster processing of VAT refunds.
“Until then, settling within 30 days is the only way to survive.”