Each entity is notified by FTA with Returns filing period that is usually a quarter or month base, which implies that an entity is required to declare its sales & expenses and related output tax on sales & input tax on expenses, where applicable, through Returns to be submitted along-with payment of due tax within twenty-eight days from the end of each Tax period.
The tax amount due or refundable for a Tax Period is computed as a difference between output tax and the input tax. Where output tax exceeds input tax, difference becomes tax due to FTA and vice versa.
Key considerations for Returns Filing
Matters to consider for accurate Returns filing are elaborated below:
Exempt supplies are the supply of goods or services, where no Tax is due and no Input Tax may be recovered. The following supplies shall be exempt from Tax:
- Financial services that are specified in the Executive Regulation of the VAT-Law.
- Supply of residential buildings through sale or lease, other than that which is zero-rated according to VAT law.
- Supply of bare land.
- Supply of local passenger transport.
Zero-rated supplies are the supply of goods or services, where no Tax is due however Input Tax is recoverable. The following supplies shall be zero-rated subject to conditions stated in the Executive Regulation of the VAT-Law:
- Export of goods and services.
- Education Services.
- Healthcare Services.
- Exported Telecommunications Services.
- International transportation services for Passengers and Goods.
- Certain means of transport.
- Goods and services supplied in connection with means of transport.
- Supply or import of investment precious metals, including gold, silver and platinum that meet the following standards:
- Metal is of a purity of 99 percent or more.
- Metal is in a form tradeable in global bullion markets
- Residential building including a building intended and designed for human occupation.
- Buildings Specifically designed to be used by charities.
- First supply of a building, or any part of a building, which is converted to a residential building, provided that the:
- Supply takes place within 3 years of the completion of the conversion, and
- Original building, or any part of it, was not used as a residential building and did not comprise part of a residential building within 5 five years prior to the conversion work commencing.
Input tax on capital asset eligible for the capital asset scheme shall be adjusted, in accordance with the Executive Regulation of the VAT-Law, over a period of either 10 ten consecutive years for buildings or parts thereof or 5 five consecutive years for other capital assets, commencing on the day on which the owner first uses the capital Asset for the purposes of its business.
Where an entity made a supply consisting of more than one component for one price, the entity shall determine whether the supply constitutes a single composite supply or multiple supplies. Single composite supply has two or more elements so closely linked as to form a single supply which it would be impossible or unnatural to split. If supply can be split, then supply of the components shall be treated as multiple supplies.
Where a supply is a single composite supply, the tax treatment of the supply shall of the principal component of the supply.
Where a supply consisting of multiple components is not a single composite supply, then each component of the multiple supplies for a single price, is subject to its respective tax treatment.
How we stand out as an Expert VAT Return Filer
Return filing is not simply a matter of recording sales and expenses and calculation of resultant input and output tax to determine due tax or recoverability, it is beyond that to know about accurate classification and treatment of below matters:
- Exempt, zero-rated and out of scope supplies.
- Single composite supply and multiple supplies in single transaction.
- Capital and operational expenditures.
- Supplies to, by and within free-zone and designated free-zone entities.
- Time and place of supply.
- Reverse charge mechanism.
- Inter-group transaction adjustments in-case of Group Return filing
- Supplies and imports within GCC region.
