Blog

Meaning: The term “reimbursement” refers to the recovery of expenses that is incurred as a principal. The term “disbursement”, on the other hand, refers to the recovery of payments made on behalf of another person.

Tax Treatment: A reimbursement is considered to be a part of consideration for the supply and follows the same VAT treatment as the main supply. Reimbursement of expenses falls within the scope of VAT and shall be vatable @ 5%. Disbursement of expenses is out of scope of VAT.

Indicators of Reimbursement:

1. Registrant should have contracted for the supply of goods & services in his own name and capacity;
2. Registrant should have received the goods & services from the supplier;
3. The supplier should have issued the invoice in Registrant’s name and registrant is under legal obligation to make the payment for it;
4. In case of goods, the registrant should own the goods prior to making the onward supply to the other party.

Indicators of Disbursement:

1. The other party should be the recipient of the goods or services;
2. The other party should be responsible for making the payment to the supplier;
3. The other party should have received tax invoice in its own name from the supplier;
4. The other party should have authorized the Registrant to make the payment on his behalf;
5. The payment should separately be shown on the tax invoice and Registrant should recover the exact amount paid to the supplier, without a mark-up.

In case, where a VAT registered owner of the goods request another VAT registered person (“importing agent”) to import goods on behalf of the former, as the VAT registered importing agent would have provided their TRN at the time of importation of the goods, the VAT amount would be automatically pre-populated in Box 6 of the VAT Return of the importing agent.

In such kind of arrangements, below 2 options are available for owner and importing agent:

1. Adjustments in the VAT return of both the importing agent and the owner of the goods in box No. 7 of the VAT return. The importing agent would make a deduction of the value of goods imported and the owner would declare the value of goods imported. The owner would then be entitled to recover the import VAT (as declared in Box No. 7 of the VAT Return) in Box No. 10 of the VAT Return as per its normal VAT recovery position. The owner and the importing agent need to agree in writing to make the adjustments. Furthermore, both parties will need to retain the evidence of this written agreement as records, in addition to other required records, including customs documentation.
2. Where the owner and the importing agent do not wish to make the adjustments stated in point no. 1, the importing agent may issue a statement to the owner as prescribed in Article 50(7) of the Executive Regulations. The statement will be considered as a Tax invoice for the purpose of recovering input tax by the owner and can be recovered via Box 9 of the tax return.The Statement shall contain the following particulars:

a. The name, address, and Tax Registration Number of the agent.

b. The date upon which the statement is issued.

c. The date of Import of the relevant Goods.

d. A description of the imported Goods.

e. The amount of Tax paid by the agent to the Authority in respect of the imported Goods.

FTA has started issuing notices for Tax Audits in United Arab Emirates. As per Article (18) of the Cabinet Decision No. (36) of 2017 on the Executive Regulation of Federal Law No. (7) of 2017 on Tax Procedures, FTA is demanding following details for the VAT return periods January 01, 2018 to January 31, 2019:

1. Standard rated supplies;
2. Tax refunds provided to Tourists under Tax Refunds for Tourists Scheme;
3. Supplies subject to reverse charge provisions (Imported Services);
4. Zero-rated supplies;
5. Exempt supplies;
6. Goods imported into the UAE;
7. Adjustments to Goods imported into the UAE and clarifications on the adjustments;
8. Standard rated expenses;
9. Audited financial statements as of December 31, 2017 and December 31, 2018;
10. Trial Balance (monthly) for the period from January 2018 till January 2019;
11. Reconciliation of General Ledger Accounts pertaining to purchases & revenues to the VAT Input & Output values respectively.

The above details must be submitted in an excel sheet for each VAT return period separately and for each group member separately, within 5 working days.

Pursuant to the requirements of the Federal Tax Authority (FTA), and in order to facilitate procedures of proving exportation of goods through Customs exit points for Value-added tax (VAT) purposes, the following procedures are required to prove exportation of the goods outside the country:

1. Issuing a customs declaration in accordance with customs procedures applicable for proving export of goods outside the country.
2. Issuing authenticated Customs Exit/ Entry Certificate.
3. Actual examination (inspection) of goods (in terms of description, type, quantity, weight, country of origin, etc.).

The above procedure shall not be duplicated when claiming refund of customs duty and deposits from Dubai Customs and for proving exportation of the goods for VAT purposes for the same transaction. Other procedures and conditions applicable for the purpose of customs duty and deposits refund shall remain unchanged.

The above shall be applicable on consignment and goods being declared by customs starting January 1^st, 2018. All concerned departments and business units shall take necessary actions to implement it in their respective scope. If the above documents are not retained by the tax-payer, the exports shall not be treated as zero-rated.

The FTA has commenced auditing of businesses registered for VAT. It is of utmost important that business gets a Health Check of its accounting record before a formal notification for the Audit is received. It will be a smooth process for business with a perfect accounting record. However, lack of compliance can expose to high risk of administrative penalties. FTA will provide 5 working days’ notice before visiting the business premises.

Items should be verified before notification arrives includes but not limited to;

• Verification of all Supplies and Purchases disclosed in the VAT Returns;
• Verification of all Receipts and Payments in bank statement(s);
• Reviewing that no disallowed Input tax has been claimed;
• Availability of all Import record and its declaration in Returns;
• Record of exports and declaration in Returns;
• Availability of Profit and Loss account and Balance Sheet;
• Proper filing of accounting record;
• Availability of Inventory record and reconciliations;
• Reviewing if there is a need to file a Voluntary Disclosure Form (VDF). If such Disclosure is required and not made in due time, penalties can be in range of;

–5% of tax amount + AED 3,000 to 5,000

–30% of tax amount + AED 3,000 to 5,000

–50% of tax amount + AED 3,000 to 5,000

UAE is taking another major step forward with the introduction of the ground-breaking Tourists Refund Scheme. The FTA has officially announced “PLANET” – a leading global provider of IP based networking products and solutions as the operator of the Tourists Refund Scheme in the UAE.

According to its website, tourists will be able to validate their refund at Dubai International, Abu Dhabi and Sharjah airports until December 16, 2018 where after the system will be in place at nine more locations – Al Maktoum airport, Abu Dhabi Port Zayed, Al Ain Airport, Al Ain land border, Fujairah Airport, Ras Al Khaimah Airport, Al Ghuwaifat land border, Hatta land border and Dubai Mina Rashid Harbour.

The operator further said tourists could be asked to present their goods to confirm they are unused. Planet said all non-UAE residents above 18 years old will be eligible for tax-free shopping. However, only the owner of the passport under which the tax-free forms are registered will be entitled to collect the refund. Tax Free Form is an official export document. It can be obtained at affiliated stores only after having purchased goods with the Registered Retailers.

“Planet” has issued guidelines setting a minimum limit of Dh250 to claim VAT refund.The tourists will receive 85 per cent of the total VAT amount after deduction of an administration fee of Dh4.80 per tax-free form.

Citing an example, if a tourist buys electronic goods worth Dh210 from a store and spend another Dh315 on buying souvenirs from another store, he can claim tax refund of Dh15 on purchases of Dh315 and not against electronics purchase of Dh210 as it’s below the minimum spend limit set by the authority.

“If the tourist spends Dh315 in the UAE, he/she will get refund of Dh7.95.

Tourists will be able to receive VAT refund for their purchases made from Registered Retailers only.

According to Planet, the tourists’ tax-free tag needs to be validated within 90 days of the purchase. If receipts are not validated within 90 days, the tax-free tag expires, and VAT cannot be claimed.

“The tourist can take goods and tagged receipt to the airport, seaport or border crossing. He will be required to visit Planet’s validation point (through self-service kiosks) to validate the invoice. Once validated, the tourist will choose a refund method – cash or credit card.

WHICH GOODS ARE NOT ALLOWED FOR REFUND? 

• Motor-vehicles, aircraft & boats
• Goods such as food & drinks which are intended to consume
• Goods which are fully/partially consumed
• Any type of Services (intangible)\

WHO IS ELIGIBLE?

“Overseas tourist” i.e. any Natural Person who is not resident of UAE and who is not a crew member on a flight or aircraft leaving UAE.

HOW MUCH DOES THE TOURIST GET BACK?

The tourist will receive 85% of the total VAT amount paid, minus an admin fee of Dh4.80 per Tax-Free form.

WHAT THE TOURIST HAS TO DO?

1. The tourist takes goods and digital Tax-Free Form (Tagged Receipt) to the airport, seaport or border crossing.
2. The tourist goes to a planet validation point: – For airports: Before checking in and going through security.
3. Once validated by Planet, the tourist chooses a refund method (cash or credit card refund)
4. Planet processes the refund.

WHAT THE RETAILERS HAS TO DO?

• All the Registered Retailers affiliated with the PLANET can avail the benefits of Tax-Free Shopping to its customers.
• Each retailer must get registration under the Tourist Refund Scheme through automated online registration process via: planetpayment.ae.
• Planet would invoice monthly for the total VAT, and the retailer can adjust the VAT return to effectively recover the VAT amount refunded.
• Planet will provide each Registered Retailer with a smartphone with the app pre-loaded, QR code tags, Point of Sale material.