The first anniversary of the introduction of Value Added Tax (VAT) in the UAE is fast approaching and, where applicable, many businesses have little time left before the end of their first tax year to carry out any required end-of-year input tax adjustments. 

Partial exempt taxpayers (ie, taxpayers that carry out both taxable and exempt supplies or non-economic activities, such as banks, holding companies, life and non-life insurance providers, charities and real estate developers) are required to review and analyze their input tax recovered over the course of the year. In certain cases, the end-of-year adjustments may result in a change to the amount of VAT that can be recovered for the year.

Below are a few tips and reminders for you to consider to make your end-of-year adjustment process smooth and less taxing:

  1. Determine your tax period.
  2. Confirm whether you need to carry out end-of-year input tax adjustments.
  3. Review whether the recoverable input tax calculated on the basis of the standard method, reflects actual use. If not, analyze and determine which alternative proxy would provide a fair and reasonable result. Document the entire review process.
  4. Ascertain whether an expense incurred on assets qualify under the Capital Asset scheme, and verify the amount of input tax (incurred on the relevant expense) recovered in the tax periods during the year, and the actual use of the capital asset. Maintain a register to keep track of the adjustments.

Please click here to view the full alert or click the Download Article button below. You can also visit our  GCC VAT website to view this and other materials:
http://www.bakermckenzie.com/en/insight/publications/2017/10/doing-business-gulf-vat-regime

To speak to us in relation to any VAT issues in the UAE and Middle East, please feel free to contact one of the lawyers below, or your usual Baker McKenzie contact.

Author

Reggie Mezu is a Senior Special Counsel in Baker McKenzie Habib Al Mulla, based in Dubai. He has practiced tax for nearly 30 years in the Middle East, Africa and Europe, including in the UAE for 15 years. Reggie regularly advises clients on tax planning, corporate structuring, cross-border transactions, double tax treaties, reform and development of fiscal frameworks, general advice, and most recently, the new value added tax (VAT) regime in the Gulf region.

Author

Bastiaan Moossdorff is a Senior Associate in Baker McKenzie Habib Al Mulla, based in Dubai. He specializes in indirect tax and has practiced indirect tax for more than 7 years in the Netherlands, the UK, the UAE and the KSA. Bastiaan has multi-jurisdictional and multi-disciplinary academic qualifications in law, accountancy and taxation.

Author

Laya Aoun-Hani is a senior associate in the Corporate & Commercial practice of Baker McKenzie Habib Al Mulla, based in Dubai. She specialises in corporate and commercial transactions, including joint ventures, distribution agreements, company structuring and restructuring, mergers and acquisitions, employment and all related matters. Laya also has particular experience in all compliance and VAT matters.

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