UAE – VAT Bad Debt Relief

At the time of sales, the registered supplier charges VAT to the customers and amount of VAT will be shown as an output VAT in VAT return. This amount is normally paid (after adjusting against the eligible input credit) to the Tax authority.

If the invoice is not paid and a bad debt situation Occurs, the VAT accounted for by the supplier is Likely to become a real cost to the business. The Bad Debt relief scheme seeks to provide a relief the supplier in such instances by permitting a of the    adjustment of the VAT charge but not paid by the customer.         

Condition of the recipient under Bad Debt Relief Scheme

  • The goods and services should have been supplied and VAT on the supply should have been charged and accounted for; 
  • The consideration for the supply should have been written off in full or in part as a bad debt in the accounts of the supplier;
  • More than six months should have passed from the date of the supply;
  • The supplier should have notified the customer of the amount of consideration for the supply that has been written of.

It is important to note that the bad debt relief can only be taken to the extent of the consideration written off in the accounts. Therefore, if only a part of consideration is written off, a bad debt relief can be taken only to the extent of such written off consideration.

Supplier should notified a customer with information that includes

  • Invoice number and date of the tax invoice which has not been paid by the customer.
  • Amount of consideration that has been written off  by the supplier

Artist and Social Media Influencer

VAT chargeable on all supplies made by Artists and SMI –
  • Any online promotional activities performed on behalf of other businesses for a consideration, such as promoting a product in a blog, featuring a product in a video or otherwise promoting a business on a social media post.
  • Any physical appearances, marketing and advertising related activities.
  • Providing access to any SMIs’ network on social media etc.

Need for Artists and SMIs to register for VAT-

UAE-based Artists and SMIs who make taxable supplies (which include zero-rated supplies) in the UAE are required to register for VAT provided the value of their taxable supplies and imports in the last 12 months exceeded, or is expected to exceed in the next 30 day the mandatory registration threshold of AED 375,000. the voluntary registration threshold of AED 187,500.

In addition, non-resident Artists and SMIs are also required to register for VAT where they make any taxable supplies with the place of supply in the UAE and no other person is obligated to account for VAT on such supplies. There is no registration threshold for non-resident suppliers in such instances.

VAT on Supply of Education Services

The Federal Tax Authority mandateThe main educational services and related goods and services supplied shall be zero rated, if supplied by any of the following ‘qualifying educational institutions’:

  • Nurseries, preschools and schools
  • Higher educational institutions owned or funded by Federal or local Government

This means that a ‘qualifying educational institution’ shall not charge VAT on the zero rated educational services they provide, and will be able to recover the VAT they pay on related costs when they file their tax returns.However all other entities that do not come under the definition of qualifying educational institution will be subject to standard rate of 5%.

Qualifying educational institution need to registered for VAT in UAE

Provision of educational services by a ‘qualifying educational institutions’ is a zero-rated taxable supply.  Hence, if the supplies exceed the Mandatory Registration Threshold of AED375,000, then the institution needs to register. It may apply for exceptions from registration via the registration application if the institution does not provide any services or goods taxed at the standard rate of 5%.  Applying for an exception will relieve the school from filing regular returns, but would also mean the school cannot recover the input tax incurred on its expenses.

AML (Anti money Laundering)

Anti-Money Laundering Registration Deadline is on 31st march 2021: failure to register could result in closure and penalty up to 5 million

The Ministry of Economy (MOE) has listed the businesses (DNFBP) that need to register in the anti- money laundering systems before march 31

Ultimate Beneficial Owner (UBO)

Regulation applicability 

Ultimate Beneficial Owner Procedures Regulation commonly known as UBO was introduced in the UAE vide Cabinet Decision No. 58 of 2020 to be effective from 27 August 2020.

Meaning of UBO

A UBO of a legal entity is a person who, ultimately owns or controls, whether directly through a chain of ownership or control.

Risk involve for not submitting UBO

Besides the penalties, as a company, you may face the loss of reputation and lose out on customer confidence.