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COVID-19 update - Indirect tax, UAE

Covid-19 is disrupting business across the world requiring tax authorities to implement rules and reliefs to support businesses through this period. We are pulling our global indirect tax resources together to create a single source of information, support and thought leadership.

Currently, the UAE government has only implemented measures which affect excise tax registrants and the international movement of goods. VAT remains unchanged, i.e. no additional measures have been taken specifically for UAE VAT.

What type of business is this information relevant for?

Any business registered for excise tax in the UAE, importers and exporters. Business sectors can include producers, importers, and stock-pilers registered for excise tax in the UAE, logistics providers, importers and exporters and shipping companies.

VAT/GST reliefs – tax authority announcements

No changes have been announced regarding VAT rates, due dates, payment dates, refund claims, or any other VAT related processes in the UAE.

Regarding excise tax, the authorities have extended the March period to cover the period 1 March, 2020 to 30 April, 2020, and delayed the due date of filing and payment to 17 May, 2020, rather than the typical due date of 15 April, 2020 to cover the period 1 March, 2020 to 31 March, 2020.

What ideas have you generated to support businesses?

Liquidity and cost reduction – steps businesses can take to more effectively manage VAT accounting and cashflow:

  • E-invoicing is now available.
  • Bad debt relief is now available.
  • Businesses can claim VAT based on the date the invoice is received and the intention to pay it back within 6 months of the agreed due date.
  • Businesses cannot defer accounting for VAT on sales by requesting/receiving payment from customers before they issue an invoice.

Workforce dynamic – the impact and opportunity created by home working:

  • Businesses may claim any VAT amounts on expenses reimbursed to employees working at home depending on the type of expense incurred and all proper documentation is retained.

Supply and demand shock – business model changes around supply arrangements, inventory management, new routes to market, migration to online trading, new revenue sources:

  • As no COVID-19 regulations have been issued with regards to UAE VAT, we recommend shifting as much work as possible to a digital platform. Any work which may be wholly completed digitally, such as consulting, advertising, etc.

Customs Effect – measures taken to relieve the international movement of goods

  • While VAT remains unaffected, certain customs relief measures have been implemented, such as a 20% refund of duties paid on goods which are sold domestically.
  • Additionally, customs clearance fees have decreased by 90%.
  • The requirement to submit a bank guarantee to clear goods from customs has been waived - existing guarantees may be refunded.
  • The UAE’s federal export credit company, Etihad Credit Insurance (ECI), will offer financial support to domestic companies to export internationally. Please click here for additional information.

Call to action

We recommend companies focus on completing digital platforms and transfer as much of their business online as possible, and to take advantage of the reduction in customs fees.

Safety of all management and staff is of top priority. The UAE’s ultimate goal is to return to business as usual as soon as it is safe to do so.

Should businesses have any queries, they may contact Najla Zeitawi at +971-58-903-4423

AUTHOR

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Najla Zeitawi
Tax Consultant
E: [email protected]