I am a newly VAT-registered business and provide health insurance for my small team and their spouses and children. Can I clam VAT back on the health insurance cost for my entire business? EM, Dubai
From the inception of VAT in the UAE it was somewhat unclear if employers could reclaim the tax charged on health insurance costs for employee families as well as direct employees. Many believed that if this was a company wide policy and included employee contracts, then they had fully met the requirements under Article 53 of the Executive Regulations. In September, the Federal Tax Authority issued a very helpful guide that clarified the position. This can found on the FTA's website https://www.tax.gov.ae under the Getting Help menu.
The VAT law mentions two circumstances where an employer is able to reclaim VAT on employee benefits. The first criteria is where there is a legal obligation to provide such benefits. Interestingly, in Abu Dhabi it is already a legal requirement for employers to provide health insurance benefits to employees and their families, so all input VAT may be recovered. Conversely in Dubai where there is no legal requirement to extend health insurance to an employee’s family, there is no automatic right to recover it.
The second criteria for recovering VAT on employee benefits is where there is “a contractual obligation or documented policy to provide those benefits to employees in order that they may perform their role”. Even if your company includes in its’ employment contracts that it will provide family health cover, it is difficult to make a case that the employer must provide this extended benefit to families in order for the employee to perform their own role. So, for companies not covered by the legal obligation to provide family cover (as in Abu Dhabi), input VAT would not be recoverable.
Our company landlord recently sent us additional VAT invoices on rent already paid for 2018, which he had not previously charged or sent to us. Can I reclaim this VAT? The invoices are dated in 2018 in line with the rent invoice and payment schedule. MT, Fujairah
I can see you are concerned that you are only now in a position to reclaim VAT that should have been charged to you and reclaimed in 2018. Article 55 of the Decree Law sets out the permitted timetable for reclaiming input VAT. Clause 1 mentions that VAT should be recovered in the first tax period (which means the first tax return) in which you receive and keep a tax invoice. Clause 2 says that if you fail to recover the VAT in the first return, you may do so in the next VAT return.
The important point here is that the law specifically mentions the date the invoice was received by you. It does not refer to the date of the invoice or the date the supplier should have raised the invoice. As long as you have evidence that you have recently received the invoice then you are fully entitled to reclaim the VAT. If the invoices were sent via email, I suggest retaining the email as it would support the date you received it.
My company owns a commercial building (warehouse), which it is planning to rent out in the near future. On the rental income, does my company have to raise a tax invoice and charge VAT even if the yearly income is less then Dh375,000. My company's turnover from operational activities (machinery trading) meets the mandatory threshold, so even if rental income is less then Dh375,000 per year, do I have to charge VAT? With the company being the owner, what are we supposed to do? MS, Dubai
Once a company has registered for VAT, all of its taxable supplies, regardless of the source of the income, are in scope for the tax. You are not permitted to segregate your warehouse rental income and your machinery trading income and charge VAT only on the part that is above the mandatory registration threshold. In fact, once you are registered, the thresholds become irrelevant unless your taxable turnover falls to a level where you are permitted to, or required to deregister. In summary, when you raise invoices for your warehouse rental you need to do so with VAT from the very first rental period.
Lisa Martin, a chartered accountant with more than 20 years' commercial finance experience, is the founder of accounting, auditing and VAT consultancy, The Counting House. Email any VAT queries to email@example.com