UAE VAT Transitional Rules

UAE VAT Transitional Rules – Contracts/Early Invoicing and Payment

With the VAT regime coming to UAE in less than two weeks, we take a look at VAT transitional rules regarding contracts and early invoicing and payment.

Transitional Rules – Contracts

Where a contract is entered into prior to the effective date of the VAT law which concerns a supply made wholly or partly after the effective date of the VAT Law, VAT will be due on the supply taking place after the effective date of the VAT Law. If the contract does not mention VAT, the value of the supply stated in the contract shall be treated as inclusive of VAT. For example, the company selling the supply has to account for 5% VAT to the FTA on the value of the supply from the sum which is in the contract.

However, if the company receiving the supply is registered for VAT and is entitled to full VAT recovery on costs incurred, the supplier can treat the contract as if the price stated was exclusive of VAT and is able to charge VAT to the recipient in addition to the previously determined price.


Transitional Rules – Early Invoicing and Payment

When an invoice is issued or payment is received prior to the date the VAT Law comes into effect, the value of the payment/invoice will be subject to VAT where the following takes place after the date the VAT Law comes into effect:

  • Transfer of goods under the supplier’s supervision
  • Goods are placed in the possession of the recipient of the goods
  • Completion of assembly of the goods
  • A customs statement is issued
  • The customer accepts the supply of goods