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Recent Guidelines on VAT Administrative Exceptions

 

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Administrative Exceptions Guidelines issued by FTA recently.

The recent guidelines on VAT Administrative Exceptions indicate that the UAE Taxmen are keen on moving towards a matured tax system at a rapid pace. Businesses were facing a tough time in fulfilling all the VAT regulations, and thus were worried about the potential fines by the Federal Tax Authority. VAT Administrative Exceptions provide registrants with concessions /exceptions allowed by the Federal Decree-Law No. 8 of 2017 on Value Added Tax (“Law”) or Cabinet Decision No 52 of 2017 on the Executive Regulations of the Federal Decree-Law No. 8 of 2017 on Value Added Tax (“Executive Regulations”) if difficult circumstances prevent registrants from following certain procedural aspects of the Law or the Executive Regulations. The mechanism shall benefit not only the small companies but also some of the larger businesses experiencing difficulties in procedural compliance, which generally have no impact on the tax amounts. It is crucial to note, however, that VAT registration exception is not covered under this process.

Businesses registered with the Federal Tax Authority (“FTA”) can request exceptions by emailing the duly filled electronic Application Form for VAT Administrative Exceptions available on the Federal Tax Authority website to specialexceptions@tax.gov.ae, justifying their limitations for compliance only on selected matters, which include;

  1. Tax Invoices: Some of the requirements, like the use of exchange rate and display of that rate on the face of the Tax invoice, was proving to be a cumbersome task for businesses. The registrant is expected to demonstrate that adequate records are available to establish the specifics of any supply, and prove that it would be impractical to issue a tax invoice as required under regulations. Businesses struggled to display of VAT rate and VAT amount on each line of supply, the use of foreign exchange conversion rate when a Tax Invoice is issued in a foreign on the face of the Tax Invoice. 

  2. Tax Credit Notes: The exception under this category shall allow the business to not mention any of the particulars, as prescribed or not to issue a Tax Credit Note in some instances and the registrant must be able to demonstrate that sufficient records are available to establish the particulars of any supply, and prove that it would be impractical to issue a Tax Credit Note as specified in the Executive Regulations. 

  3. Length of the Tax Period:  Cash flow, cost and time of the workforce required to compile the data, check the correctness and then make a payment without even receiving the consideration from the customers are acting as an impediment to the companies in monthly or quarterly return filing. If the registrants are allowed to change the length of the Tax Period to half-yearly (6 months), the compliance shall increase as the business may have ample of time to receive the consideration, prepare, review and submit the Tax Returns. 

The following registered persons shall be able to take the benefit under Administrative Exceptions upon acceptance of the reasons by the FTA;

  1. Individuals: Board members, property owners, and other individuals such as freelancers after providing;

  • The number of invoices issued in the preceding 12 months

  • Total tax paid in the preceding 12 months 

  • Taxable supplies in the preceding 12 months

  1. Businesses in a constant refund position: Businesses that were in a refund position in all the Tax Periods in the preceding 12 months, and expect to remain in the same position. The FTA shall assess whether the registrant expects any change in the business model, which may result in a change of refund position. 

  2. Small and medium enterprises (SME) with funding: Registered SMEs which receive official financing approved by the Government can also seek the change in the Tax Period length and shall have to provide the details of Total tax paid in the preceding 12 months and the Taxable supplies in the preceding 12 months.

  3. Small and medium enterprises (SME) without funding: Registered SMEs which do not receive official funding approved by any Government entity provided the total value of Taxable supplies in the preceding 12 months was equal to or less than AED 5 million. The FTA shall consider various factors before allowing the alteration in Tax Period length which namely includes;

  • Total tax paid in the preceding 12 months 

  • Taxable supplies in the preceding 12 months 

  • Whether the registrant has received any penalties in the preceding 12 months

  1. Stagger: Businesses have often complained that tax periods do not align with the financial year-end for them. This administrative exception shall allow businesses to align their Tax Periods with their Financial Year end thereby reducing the burden on the teams managing VAT. A registrant who is on quarterly filing may request a change in the quarter assigned to him so that the Tax Period ends with the month requested by him. For instance, a Company currently filing returns for quarters ending 28 February, 31 May, 31 August and 30 November may want to align the tax quarters along with its accounting year end which could be 31 December. Accordingly, it can request the FTA to change it’s Tax quarter to end on 31 March, 30 June, 30 September and 31 December every year.

  2. Extension of time for the export of goods: The registrant must provide the actual reasons/circumstances, to seek an extension of time for the export of goods. If the FTA determines the circumstances to be beyond the control of the supplier and the recipient or due to the nature of the supply, it is not practicable for the supplier to export the goods within 90 days, the FTA can extend the 90 day period. 

 

The timeframe required in the execution of the administrative exceptions is mentioned in the guide.

If you have any questions about this Article, please get in touch with RSM AE office .

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Recent Guidelines on VAT Administrative Exceptions

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