Are You Still a Little Confused About VAT?

Well, as it turns out, you’re not alone. Here are 5 things people are still asking Mrs. Google about, 13 months after VAT was launched on 1st January 2018. And some of them don’t have straightforward answers. But unfortunately, them’s the breaks, kiddo!


#1  What is VAT charged on?

The answer to that, mes amigos, is contained in the many online pages provided by the Federal Tax Authority (FTA) in the UAE and the General Authority of Zakat and Tax (GAZT) in Saudi Arabia. But just for fun, here are a few weird examples from the 130 countries that have VAT around the world:

  • Most nuts that are sold still in the shell are zero-rated, while those out of their shells attract VAT.
  • Bumblebees are taxed under VAT, while honeybees are not.
  • Orange squash, petrol, ice cream, and Poodle food are rated as “luxuries”, while caviar, lap dances, and Labrador food are not.

#2  Does VAT apply to small businesses?

This question is most often asked by small shopkeepers, gents’ salons and consultants, usually saying “look, I’m really small! Surely all this malarkey doesn’t apply to me!” The answer is that it doesn’t matter what you do, it’s whether your wee business earns above the threshold. If you cut enough hair, or make enough stuffed toys to reach the threshold, you MUST charge and declare VAT. And you must have good financial records to avoid fines. Estimates won’t cut it!

#3  When should I ask for my refund?

Well, here’s what happens if you ask for your refund to be paid now. You have to give a letter to your bank authorising them to make your financial records available to the Tax Authorities. If that makes your stomach lurch and your toes to curl slightly in terror, you can just carry your refund forward until it works its way out of the credit side of things.

#4  How much VAT can I claim back?

Only as much as you are allowed. It’s not your money. It’s the government’s. And they don’t give second chances if you get it wrong. Sorry is not in the Federal Tax Authority/General Authority of ZAKAT and Tax dictionary.

#5  When am I liable for VAT declaration? When I get paid or when I invoice?

Unfortunately, the Federal Tax Authority/General Authority of ZAKAT and Tax could care less about your ability or otherwise to bring in all the money you have invoiced. They want theirs in the period you invoice, not the period in which you get paid. So, you’d better have a good system for collecting payments. Funnily enough, I know of one – oh! It’s ours!

There you have it, 5 of the most often quoted confusions about VAT in the UAE and KSA.

And the last example from the swamp of crazy – goods that are stolen from a shop is not subject to VAT, though stolen cash is. Go figure!

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