VAT q&a: 'Can a restaurant add VAT at checkout?'

I recently ordered through a restaurant’s website to purchase food for takeaway. The website stated prices are inclusive of VAT but at the checkout page they added VAT to the prices shown. On seeing this I decided not to pay on the website but to pay when I picked up the food. When I went to collect and pay for the food I asked about the inconsistent website pricing and was told by the manager that this was an error on the website which they would correct, and it should have said that all prices were exclusive of VAT. I was unhappy to have been charged the additional VAT but the restaurant refused to take it off at the till. They showed me that their restaurant menus also said prices were exclusive of VAT as justification that the website was an error. Is what they are doing correct? DH, Dubai

No this isn’t correct at all and is not compliant with the VAT law. I find it incredible that 17 months after the introduction of VAT so many consumer businesses are still getting this wrong. It’s not only small independent businesses that make this mistake, but also chains with multiple sites.

Article 38 of the Decree Law and Article 27 of the Executive Regulations cover this topic. The base law is that advertised prices must include VAT. The Executive Regulations set out a few exceptions where prices may be shown exclusive of VAT. These exceptions are mainly relevant to the export of goods or services or selling to businesses who are themselves VAT-registered. Therefore, when selling to consumers all suppliers should show prices inclusive of VAT and must not add VAT at the point of payment. This covers all advertised prices whether they be on a supermarket or shop shelf, price labels on the goods, website prices and menus.

Your receipt or invoice must separately show the amount of VAT that you have been charged and the rate of VAT, but the individual amounts on there should also be inclusive of VAT. I have heard of retailers being fined Dh10,000 for displaying incorrect prices on labels, so this is something that all businesses supplying to consumers should be mindful of and get right.

If you want to get this corrected and the supplier isn’t willing to do anything or still believes what they are doing is correct, you have the option of making a complaint to the Ministry of Economy. The ministry has a consumer protection department which is concerned with, among other things, unfair commercial practices that harm the consumer and controlling prices. Both of these seem relevant in your case. The hotline number is 600-522-225 or you can file a complaint through the Dubai Consumer app.

We recently received some purchase invoices dated June and July 2018. The reason for the delay is that there were ongoing discussions with the supplier that delayed payment and they only agreed to issue VAT invoices after they received payment. Can you advise if I can reclaim this VAT and if I must try to resubmit last year's August VAT return with a voluntary declaration? MT, Fujairah

The practice of suppliers only issuing VAT invoices after receiving a payment is quite a common one. It is to prevent them from having to pay output VAT before they have received payment for their invoices. This practice is not in compliance with the VAT legislation and I would caution against doing this routinely.

Article 25 of the Decree Law sets out in detail what the date of supply should be and you have 14 days from that date to issue a tax invoice. There are obviously exceptions and special cases, but the basic premise is that the date of supply for goods is when goods are delivered or ownership is transferred to the customer or the provision of services is completed.

Article 55 clause one of the Decree Law covers receiving supplier invoices and reclaiming input VAT. It talks specifically about the date the supplier invoice is received and kept, rather than when it is dated, so if the supplier delays issuing the invoice, the VAT legislation doesn’t penalise the recipient for this.

Clause two of Article 55 goes on to state that the input VAT may be recovered in the VAT period in which the supplier invoice is received or in the subsequent VAT period. That means you have two VAT returns to claim this input VAT.

You definitely do not need to do a voluntary declaration and try to correct a previously filed return. The voluntary declaration option is used to correct a significant error in a previously filed return. You must submit a voluntary declaration if you have under reported the VAT amount payable by Dh10,000 or more, or you have applied for a refund for more than you are entitled, or you are not making any future VAT returns. If the error is less than Dh10,000 of VAT you can just correct it in the next return. Nothing in the circumstances you outline in your question would indicate that a voluntary declaration is needed.

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 pf@thenational.ae