January 2020 / United Arab Emirates

On 28 December 2018, the UAE Federal Tax Authority (FTA) issued an Input Tax Apportionment: Special Methods Guide (the updated guide) according to which it was clarified that the calculation of the "actual use" should be made in accordance with one of the special apportionment methods described in the updated guide.

The first version of the guide was published on December 2018 and provides for special methods to determine the recoverable part of the residual input VAT for the taxpayers who are not allowed to fully recover the Input VAT incurred on the goods and services supplied to them. These methods such as the outputs based method or transaction count method would be accepted in the case where the standard method provided by article 55 of the Cabinet Decision No. 52 of 2017 on the Executive Regulations of the Federal Decree Law No 8 of 2017 on Value Added Tax is not appropriate. However, the application of the special methods requires prior approval from FTA following an application made by the taxpayer. The updated guide provides for the same rules as its first version with the following amendments:

• The taxpayers applying for methods of Input VAT Apportionment other than the standard method are required to submit their calculations to the FTA for a minimum period of 12 months preceding the application (previously the calculation was set for a 6-12 month period).
• Appendix 2 amended (example on input tax apportionment): the FTA has added a disclaimer stating that the example may not be suitable for all taxpayers and needs to be adapted to the type of business.
• Addition of an Appendix 3 on Common Errors: the FTA has provided a checklist that taxpayers need to go through before sending their application to the FTA.

On 30 December 2019, the UAE Federal Tax Authority (FTA) published an updated User Guide on excise tax returns. This is an updated version of the guide issued previously in August 2019. The new guide provides the following amendments:

• addition of Form EX203D on Stockpile Declarations;
• Form EX203B on Lost & Damaged Declarations: the FTA clarifies that this form can be submitted multiple times but if the FTA requests a Destruction Certificate for any Lost & Damaged form, then the taxpayer will not be allowed to submit a new Lost & Damaged declaration until the process of the Destruction Certificate is completed;
• Destruction Certificate: the FTA provides that it can request that the taxpayer submit the Destruction Certificate; and
• the FTA added a paragraph in each section providing that when filing the forms, the taxpayer has the possibility to request from the FTA to add a new product if it is not on the FTA list.

On 13 January 2020, the Federal Tax Authority (FTA) published the turnover declaration form. This form must be submitted by an applicant registering for VAT purposes. The form, which must be printed with the applicant's letterhead, must disclose the following items:

• turnover realized by the applicant from 2017 to 2020 (if applicable); and
• the month and year from which the applicant started making taxable supplies and reached the registration threshold (i.e. the mandatory threshold of AED 375,000 or the voluntary threshold of AED 187,500).

On 7 January 2020, the Federal Tax Authority (FTA) published an updated version of the new residences VAT refund user guide (the guide), which had initially been published in April 2018.

The guide provides that VAT refund applicants must file an electronic request using the FTA portal (and not through the manual process previously applicable). The guide also provides detailed instructions on the new VAT refund application processes.

On 21 January 2020, the Federal Tax Authority (FTA) launched an online platform for processing VAT refund requests for UAE nationals on expenses incurred on their new residential construction in the United Arab Emirates. The FTA also issued a user guide detailing the procedures to be followed for submitting the online VAT refund requests. The applicant is required to create an e-Services account on the FTA portal and submit the new residence VAT Refund Request form along with the specified documents. FTA will send an email notification if any additional details are required for their verification. After processing and approval of refund, the VAT refund amount is transferred to the applicant's bank account. The four specified documents to be submitted online along with the application are:

• a copy of the Family Book;
• a copy of the Emirates ID;
• documents such as water and electricity bills as proof of the building occupancy; and
• the construction contract and certificate of completion from the municipality.

The refund form is to be submitted within 6 months from the date the residence becomes occupied or the date of building completion certificate, whichever is earlier. The new residencies VAT refund user guide is published on the official website in the VAT refunds section.

On 30 January 2020, the Federal Tax Authority (FTA) published clarification VATP017, "Time-frame for recovering Input Tax Issue" (the clarification). In accordance with the combined provisions of article 55(1) of the Federal Decree-Law No. 8 of 2017 on Value Added Tax and article 54 (2) of the Executive Regulations (Cabinet Decision No. (52) of 2017 on the Executive Regulation of the Federal Decree-Law No. 8 of 2017 on Value Added Tax), input tax must be recovered in the first taxable period in which the following conditions are satisfied:

• the taxable person receives the tax invoice; and
• the taxable person has the intention to make the supply payment before the expiration of a period of 6 months after the agreed date of payment.

The FTA clarified that the above conditions will only be met when the taxable person completes the internal approval process and forms the intention to make the payment within the prescribed period. If an invoice is received during a taxable period and the intention to make the payment is formed in a later taxable period, the input tax can only be recovered in that later taxable period. The clarification further provides that if the input tax is not recovered in the first two taxable periods, a taxable person is required to submit a voluntary disclosure. The voluntary disclosure should amend the input tax reported in the VAT return of one of the two taxable periods.