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Moustasharoun Bureau UAE

Weekly Newsletter

Issue #106 – May 26, 2020

Is your business prepared for a

change in the VAT rate?

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Content

03 Subject of the week

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06

Our customers

News of the week

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08

Did you know

Quotes & Humors

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06

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Subject of The Week

Is your business prepared for a change

in the VAT rate?

The recent announcement by the

Kingdom of Saudi Arabia (KSA) that

it is to raise its rate of VAT from 5

per cent to 15 per cent, effective 1

July 2020, caught many people by

surprise.

This will result in a scramble by

businesses to ensure that once the

new rate is introduced they are able

to comply, in as far as invoicing

goes, but equally as important, that

the changes made do not negatively

impact commercial arrangements

that are already in place.

There have been numerous

requests in the UAE, lobbying for

various additional types of VAT

relief beyond those already

announced,

varying from a total abolishment of

VAT, a six-month VAT holiday, to

a reduction in VAT rates.

The UAE government has

indicated that it does not intend to

follow KSA by increasing its

standard VAT rate. However, as

the saying goes, forewarned is

forearmed.

Since the implementation of VAT

in January 2018, our organization

has been called upon to review

VAT compliance at many

organizations and almost, without

fail, have identified deficiencies of

varying levels of severity.

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Invariably, this was the result of either a rushed implementation, advice given

by inexperienced consultants or business owners not being provided the

correct information by employees tasked with ensuring compliance. These

businesses were blissfully unaware of their potential VAT liabilities and in some

cases had already incurred significant penalties.

This is an ideal opportunity to review your existing VAT framework and update

or amend it where required.

The obvious areas to consider are invoicing, quotations, and purchase orders,

but be aware that there are many more areas that should be considered, e.g.;

impact on working capital management - your cash flow.

transitional rules - the change between now and what is to come.

embedded VAT rates in contracts - contracts that specify 5% but do not

make provision for a changed rate.

This is by no means an exhaustive list and professional advice is

recommended.

If you have concerns, please feel free to contact us to support you in navigating

through these challenging and often turbulent times.

Source: www.khaleejtimes.com

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Our Customers

“Cover Link Insurance Agency” has over 20 years' experience and

specializes in all animal insurance, such as mortality insurance for

Equine, Camel, Livestock, Aquatic animals and more. Insurance

policies provide cover for mortality and can be extended to cover

Transport, Theft, Liability.

“Cover Link Insurance Agency” longevity is the testament to

enduring commitment to the changing needs of the clients, both new

and old. They constantly strive to provide innovative and cost-

effective insurance and risk management solutions for clients in the

Gulf and Middle East.

Email: info@coverlink.ae

www.coverlink.ae

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The sales model is typically known as consignment, sale on approval, or sale

or return. Under this arrangement the supplier will provide products to the

buyer but the buyer is not obliged to pay until he has sold them to his

customer, or he agrees to take ownership of them from the supplier.

Typically, if the items remain unsold, the customer can return them to the

supplier without payment. Customers like this arrangement because all the

risk stays with the supplier. However, this type of sale creates some

confusion from an accounting and VAT perspective.

Because the customer does not take legal ownership of the products until

they are sold on, account for them as your stock until the final sale happens,

even though they are not physically in your possession.

Similarly, from a tax perspective, you do

not need to account for output VAT when

you transfer the goods to your customer.

For consignment stock, the date of supply

– which typically dictates the timing of

accounting for output VAT – is delayed

until when your customer sells the goods

to his customer or 12 months from the

date you delivered the goods to him -

whichever is earlier.

If your customer keeps the goods without selling them for more than 12

months from the date of delivery, you must raise an invoice and account for

the VAT, even though your customer might not have an obligation to pay you

for the goods. If your customer keeps the goods for less than a year and then

returns them to you, there is no need to raise a tax invoice or account for the

output VAT on that transaction.

Source: www.thenational.ae

News of The Week

How do you charge VAT for items that are not sold yet?

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Did you Know?

Did you know that for businesses

investing in high-value assets such

as machinery, buildings etc., it

allows businesses to recover the

complete input VAT in the first year

based on the intended use with a

provision to repay later on account

of change in use over the period,

then input VAT adjustment is

required?

Common Mistakes

When the Tax Invoices issued in foreign currency, the tax amount

payable should not be expressed in foreign currency; it should be

expressed in AED!

Did you know…& Common Mistakes

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Quotes &Humors

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Moustasharoun Bureau is a consulting

office that offers accounting, taxation,

internal audit and management

services to individuals and corporates.

Business Bay, Blue Bay Tower, 6th Floor, Office 611 & 612, Dubai, UAE.

Telephone: +971 4 27 27 201 - Mobile: +971 50 501 5180

The information provided on this newsletter does not, and is not intended to, constitute legal, taxation or financial advice, instead all information, content, and materials

available on this newsletter are for general informational and educational purposes only. Information on this newsletter may not constitute the most up-to-date legal, taxation,

financial or other information. This newsletter contains links to other third-party websites. Such links are only for the convenience of the reader, user or browser, Moustasharoun

Bureau do not recommend or endorse the contents of the third-party sites.

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