Things to Consider Before Reclaiming Your VAT Expenses in UAE

 Under the UAE VAT Law, it is the taxpayer’s responsibility to ensure that the VAT computed, accounted and documentation are in accordance with UAE VAT Laws. To know how you can claim your VAT expenses, first let us understand who can claim input tax.

A person who has registered for VAT is entitled to recover the tax that is incurred on the purchase of goods and services, which are then used to make taxable supplies. 

What are the circumstances in which companies can claim the input tax?

• If businesses are registered under VAT – they can file for a refund. However, the end consumer cannot claim any refunds)

• VAT should have been properly and correctly charged.

• Businesses should be able to produce the proper documentation to show that they have rightfully paid the VAT.

• The claims need to be filed within 6 months of the supply date, on the amount paid.

If your company’s VAT accounts are too detailed and if you need assistance, it is best to indulge in VAT consultancy services in UAE, to ensure a smooth and seamless process for your VAT claims, ensuring there are no discrepancies in your accounting methods.

There are also certain exceptions when it comes to VAT claims, and following are a couple of them:

• If the goods and services on which you paid VAT, are used for the purpose of making non-taxable supplies – you cannot recover the VAT paid on those goods and services.

• If the input tax is related to the capital assets that depreciated before your tax registration, then you cannot claim to the extent the assets have depreciated.

• If the services have been received over 5 years prior to the tax registration date – the input VAT cannot be claimed. However, this is only applicable for services, not goods.

• Before registering for tax, if you transferred the goods to another GCC country – you cannot make refund claims.

If you’re tired of running helter-skelter for your tax refunds, reach out to VAT consultancy experts in the UAE, TRC Pamco – and they can help you rightfully file your claims.

Insights on Exempted Licensees under ESR in UAE

 On 30 April 2019, the UAE enacted the ESR in Resolution No. 31 of 2019. Any natural or juridical person licensed by a competent licensing authority in the UAE (licensee) that carries out any relevant activity is subject to the ESR. And on 11 September 2019, the United Arab Emirates (UAE) issued Ministerial Decision No. 215 of 2019 containing guidance for businesses on compliance with the Economic Substance Regulations (ESR), enacted in April. 

The updated ESR states a change in the definition of the Licensees. It now applies to any corporate (within or outside UAE) or any unincorporated partnership conducting relevant activity. Previously, sole proprietors, trusts and foundations also were in the ESR scope, but they are no longer included in the definition of licensees.

The new exempted categories from the ESR notification include:

• Investment funds
• Entities owned entirely by UAE residents, and are not a part of any MNCs, and carry out activities ONLY within the UAE.
• Entities that pay taxes outside of the UAE.
• Branches of foreign parent companies where the income is taxed outside of the UAE.

With the current exemptions, come some changes to the ones that were previously exempted. Government entities are no longer exempt from ESR notifications. Unless they fall in one of the above scopes – they must comply with the updated ESR Dubai rules.

For companies that are outside the UAE but have relevant business operations in the UAE need to evaluate the impact of the updated ESR guidelines on the previous analysis.

It would be advisable to consider and evaluate the impact of the updated ESR on your business and understand if you need to submit or re-submit your Economic Substance Regulation Notification. If you need any assistance for ESR filing in Dubai, get in touch with TRC Pamco, one of the best audit firms in Dubai.