EXTP007: Excise Goods which are deficient/missing – Process for

Excise Tax Public Clarification

EXTP007: Excise Goods which are deficient/missing – Process for the destruction of Excise Goods within a Designated Zone

There are certain limited cases envisaged under Cabinet Decision No. 37 of 2017 on the Executive Regulation of the Federal Decree-Law No. 7 of 2017 on Excise Tax (“the Executive Regulation”), where relief from excise tax is available for excise goods that are found to be deficient, or there is a shortage in their quantity, within an excise tax designated zone.

In addition, there may also be circumstances where a business may seek relief from the Federal Tax Authority (“FTA”) from paying the Excise Tax associated with goods destroyed within a designated zone.

In order to destroy excise goods and obtain the relief mentioned above, the FTA must be notified of the deficiency or shortage, and its approval must be obtained in line with the process outlined in this document.

Summary

In principle, goods that are considered ‘wastage’ or are deficient or there is a shortage of the expected quantity when located within a designated zone, will be treated by the FTA as having been released for consumption and, therefore, will be subject to excise tax.

As an exception to the above provision, the Executive Regulation allows for a relief to be granted from accounting for excise tax on goods located within an excise tax designated zone in certain cases. Such relief is available where the warehouse keeper responsible for the excise goods follows the process outlined in this document.

Relief will only be granted where the FTA is notified by the warehouse keeper within the specified timeframe and accepts that the deficiency in, or shortage of, the excise goods are due to a legitimate cause.

Where a taxable person intends to destroy excise goods located within a designated zone, they must first obtain prior approval from the FTA in order to destroy the goods.

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FTA Clarification Public Tax Excise EXTP007

FTA Clarification Public Tax Excise

FTA: Clarification Public Tax Excise

There are certain limited cases envisaged under Cabinet Decision No. 37 of 2017 on the Executive Regulation of the Federal Decree-Law No. 7 of 2017 on Excise Tax (“the Executive Regulation”), where relief from excise tax is available for excise goods that are found to be deficient, or there is a shortage in their quantity, within an excise tax designated zone.

In addition, there may also be circumstances where a business may seek relief from the Federal Tax Authority (“FTA”) from paying the Excise Tax associated with goods destroyed within a designated zone.

In order to destroy excise goods and obtain the relief mentioned above, the FTA must be notified of the deficiency or shortage, and its approval must be obtained in line with the process outlined in this document.

Summary

In principle, goods that are considered ‘wastage’ or are deficient or there is a shortage of the expected quantity when located within a designated zone, will be treated by the FTA as having been released for consumption and, therefore, will be subject to excise tax.

As an exception to the above provision, the Executive Regulation allows for a relief to be granted from accounting for excise tax on goods located within an excise tax designated zone in certain cases. Such relief is available where the warehouse keeper responsible for the excise goods follows the process outlined in this document.

Relief will only be granted where the FTA is notified by the warehouse keeper within the specified timeframe and accepts that the deficiency in, or shortage of, the excise goods are due to a legitimate cause.

Where a taxable person intends to destroy excise goods located within a designated zone, they must first obtain prior approval from the FTA in order to destroy the goods.

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FTA issued Public Clarification (VATP029) on Gold Making

FTA issued Public Clarification (VATP029) on Gold Making Charge

FTA issued Public Clarification (VATP029) on Gold Making Charge

Gold jewelers generally receive consideration for the supply of gold jewelers to cover the price of the gold as well as for a making charge.

In some instances, taxable persons supplying gold jewelry reflect the gold price and make a charge separately on the tax invoice issued for the supply, and in other cases, both are reflected as a total price.

This Public Clarification provides guidance on the application of the VAT legislation with regards to making charges received by gold jewelers

Tax registrants supplying gold are not required to impose VAT on the supply of gold and products which mostly consist of gold if the conditions of Cabinet Decision No. 25 of 2018 on the Mechanism of Applying Value Added Tax on Gold and Diamonds between Registrants in the State (“Cabinet Decision No. 25”) are met. In such instances, VAT in respect of the gold is accounted for under a special reverse charge mechanism which requires the registered recipient to account for VAT on the supply instead of the supplier.

The reverse charge mechanism only applies to the supply of goods by a registrant.

If the supplier charges separate considerations for the gold and the making service or reflects the price of these components separately, the supplier is required to impose VAT on the service component.

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Tax Procedures Public Clarification Redetermination of Administrative Penalties

Public Clarification Redetermination of Administrative Penalties

Tax Procedures Public Clarification Redetermination of Administrative Penalties

On 28 April 2021, the Cabinet issued Decision No. 49 of 2021 on Amending some Provisions of Cabinet Decision No. 40 of 2017 on Administrative Penalties for Violations of Tax Laws in the UAE (“Cabinet Decision No. 49 of 2021”)1. Cabinet Decision No. 49 of 2021 amended some of the administrative penalties applicable to certain violations and allowed for a redetermination of some of the penalties already imposed.

On 30 December 2021, Cabinet Decision No. 49 of 2021 was amended by Cabinet Decision No. 108 of 2021 on the Amendment of Cabinet Decision No. 40 of 2017 on Administrative Penalties for Violations of Tax Laws in the UAE (“Cabinet Decision No. 108 of 2021”), with effect from 1 January 2022.

Cabinet Decision No. 108 of 2021 amends the timelines provided to benefit from the concessionary measures provided in the form of redetermination of administrative penalties.

This Public Clarification provides detailed information on the redetermination of some of the penalties already imposed.

Details relating to the amendments to administrative penalties in accordance with the First Article of Cabinet Decision No. 49 of 2021 have been discussed in the Tax Procedures Public Clarification “TAXP001 – Amendments to the Penalties Regime”, available on the FTA’s website

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Tax procedures effective Nov 1, 2021

Tax procedures effective Nov 1, 2021

The Federal Tax Authority first time has amended “Tax Procedures” Federal Decree-Law No. 7 of 2017 – Issued 11 Jun 2017 and Federal Decree-Law No. 28 of 2021 – Issued 16 Sep 2021 (Effective from 1 Nov 2021).

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VAT User Guide

VAT USER GUIDE

Brief overview of this user guide

This guide is prepared to help you navigate through the Federal Tax Authority (FTA) website and successfully complete your Value Added Tax (VAT) registration form. It is designed to help you:

  • create an e-Services account with the FTA (you will need to do this before you can register for VAT);
  • provide accurate answers to the questions on your VAT registration form by explaining what information you are required to provide; and
  • Understand the icons and symbols you might see as you complete the registration form.

You should find that setting up an e-Services account is similar to setting up other online accounts. The VAT registration form is also designed to be straightforward and wherever possible it will auto-complete information for you.

If you need help setting up your e-Services account or have questions on specific fields in the VAT registration form, please contact us.

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VAT treatment of compensation-type payments

VAT treatment of compensation-type payments

VAT is a tax on supplies of goods and services. Therefore, no VAT is due if no supply takes place. As part of business arrangements, businesses will often make payments to compensate each other for any loss, omissions, or other wrongdoings. A question arises whether VAT is due on such payments.

Where payment is not a consideration for a supply, no VAT is due on the payment.

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profit-margin - scheme eligibile goods

Profit margin scheme – eligible goods

It is important that businesses properly identify those goods which qualify to be sold under the profit margin scheme, in the context of transitional periods where ‘second hand’ goods may not have been subject to VAT prior to implementation of VAT in the UAE.

Only those goods which have previously been subject to VAT before the supply in question may be subject to the profit margin scheme. As a result, stock on hand of used goods which were acquired prior to the effective date of Federal Decree-Law No. (8) on Value Added Tax (“VAT Law”), or which have not previously been subject to VAT for other reasons, are not eligible to be sold under the profit margin scheme.

VAT is therefore due on the full selling price of such goods.

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Non-recoverable input tax entertainment service

Non-recoverable input tax – entertainment services

Article 53 of Cabinet Decision No. (52) of 2017 on the Executive Regulation of the Federal Decree-Law No. (8) of 2017 on Value Added Tax (“VAT Executive Regulations”) stipulates input tax which is not recoverable by businesses (which, in most cases, will mean Taxable Persons).

There are a number of circumstances in which businesses have sought clarity over the definition of ‘entertainment for the purposes of the input tax restriction, and in particular what should constitute entertainment of staff or business contacts as opposed to incidental business-related expenses which would be recoverable under normal VAT rules.

This Public Clarification explains the application of Article 53 of the VAT Executive Regulations with regards to VAT which is non-recoverable in respect of entertainment or hospitality of any kind.

VAT incurred on any costs which are used for a genuine business purpose, or which are incidental to a business purpose e.g. food and drink provided during a business meeting, shall be recoverable (subject to normal VAT recovery rules). However, where the hospitality provided becomes an end in itself and could be construed as the purpose for attending an event, such costs will be considered to be entertainment in nature, and the VAT incurred shall not be recoverable. More information on how to define whether costs are incidental to a business purpose, or considered to be an end in themselves, is provided below.

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Public Transportation

Public Transportation

Article 34 of Cabinet Decision No. 52 of 2017 on the Executive Regulations of the Federal Decree-Law No. 8 of 2017 on Value Added Tax (“VAT Executive Regulations”) states the means of transport which qualify for zero-rating under Clause 4 of Article 45 of the Federal Decree-Law No. 8 of 2017 on Value Added Tax (“VAT Law”).

One such qualifying means of transport includes the supply of a bus or train that is designed or adapted to be used for public transportation of 10 or more passengers.

This Public Clarification shall discuss the definition of ‘public transportation and its interpretation for the purposes of identifying those buses or trains which qualify to be supplied at the zero rates under this provision.

For the avoidance of doubt, this Public Clarification impacts upon the VAT liability of the supply of the vehicles themselves, and does not affect the VAT liability of transportation services supplied under Clause 2 of Article 45 of the VAT Law (i.e. international transport of passengers and goods, which is zero-rated) or under Clause 4 of Article 46 of the VAT Law (i.e. local passenger transport services, which is exempt from VAT). The conditions for applying the zero-rate or exemption to such transport services are covered in Article 33 and Article 45 of the Executive Regulations respectively.

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Farm-House-and-Farm-Land-UAE-VAT-Public-Clarification

Farm House and Farm Land – UAE VAT Public Clarification

Article 44 of 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”) describes the definition of “bare land” for the purposes of the exemption from VAT set out in Federal Decree-Law No. 8 of 2017 on Value Added Tax (“VAT Law”). Article 37 of the Executive Regulations describes the definition of “residential building” for the purposes of the zero-rating (in respect of the first supply) and the exemption from VAT as set out in the VAT Law.

The VAT Real Estate Guide provides some clarity on the interpretation of these provisions in the context of farmhouses and farmland. The FTA is aware of a number of circumstances whereby additional clarity has been sought on the VAT status of farmhouses and farmland.

It is often necessary to consider each supply on its individual facts where farmland and buildings are concerned. However, there are a number of principles that can be applied when discussing the VAT treatment of supplies (by way of sale or lease) of both farmland and farm buildings:

  • Farm houses which meet the conditions to be treated as a residential building should be exempt from VAT (or zero-rated in the case of the first supply after construction). A building will typically be a residential building where it is occupied by a person as their principal place of residence;
  • Other farm buildings not intended to be used as a principal place of residence will be subject to the standard rate of VAT. This would include farm houses which are not used by a person as their principal place of residence, e.g. houses used as weekend homes only;
  • Farm land which is considered ‘covered’ with buildings or civil engineering works should be subject to VAT at the standard rate;
  • Farm land which is considered ‘bare land’, i.e. the plot has no buildings or civil engineering work (not even in-built irrigation etc), should be exempt from VAT; and
  • The supply of a farm as a whole should be considered in light of the rules regarding composite or mixed supplies and any consideration apportioned appropriately where applicable.

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Date of Supply for Independent Directors

Date of Supply for Independent Directors

The date of supply prescribes the point in time when a VAT Registrant needs to account for VAT. The date of supply is determined either as per the general rules or the special rules, depending on whether there will be periodic payments or consecutive invoices.

This Public Clarification discusses the date of supply for the Board fees paid to Independent Directors.

In the scenario where the Board fees for the Independent Directors are not known at the outset and are determined only upon the conclusion of the Annual General Meeting, the date of supply would be triggered when such fees are known.

In other cases where the Board fees are known at the outset, the date of supply would be determined as per Article 26 of the Federal Decree-Law No. (8) of 2017 on Value Added Tax (“VAT Law”) where there are periodic payments or consecutive invoices. However, where there are no periodic payments or consecutive invoices, the date of supply would be determined as per Article 25 of the VAT Law.

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Ahmed Saleh Al Nuaimi Auditors and Accountants is a unique, high-spirited team of Certified Public Accountants ,  Chartered Accountants ,  Certified Management Accountants and Auditors making creative and innovative contributions to our clients and our community. The insights and quality services we provide help build trust and confidence among our clients. We offer an integrated array of specialized services including Audit, Accounting,Tax, Consulting and Advisory

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