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How VAT will impact everything from auto insurance to cleaning contracts

Failure to update contracts could result in companies being liable for taxes

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Gulf News

Dubai: Some UAE consumers thought they had finished paying for their car insurance and other services for the coming year. Now they’re having to think again.

Gulf News has heard from some consumers after they received letters asking for more money for service contracts that extends into 2018. This includes auto insurance, commercial rental agreements and contracted services.

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Start adding VAT clauses to your service contracts, lawyers warn

The reason is that these services will be taxable at a rate of five per cent under the value added tax (VAT) that will be introduced throughout the UAE on January 1, 2018.

Companies too are confused about how this will impact their service agreements, and lawyers that Gulf News spoke to say many are struggling to figure out just how to recover tax from customers, especially those who have paid for their services in advance.

Legal experts say that companies that provide taxable services must check their contracts to ensure that they include provisions for collecting taxes under the new regime. If they don’t, they could be totally liable for the tax.

A silent contract means that it makes no mention of VAT.

“If the contract is silent … then contractually he can’t pass it on,” said Shiraz Khan, a senior tax adviser at Al Tamimi & Company.