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Abu Dhabi, UAEMonday 10 December 2018

VAT q&a: 'What is the best way to make a VAT payment to the Federal Tax Authority?'

The reader has had the payment rejected twice

The email requests the reader to update information on the VAT registration document. Photo: Getty Images
The email requests the reader to update information on the VAT registration document. Photo: Getty Images

I filed my VAT return a week ago and have been trying to make a payment ever since without success. I used my GIBAN with a bank account transfer, which was initially transferred but then returned to my bank. I then tried paying through the FTA website payment portal which was also rejected. What is the foolproof method for me to make a payment and what are the costs involved? LS Dubai

Making payment should be the easy part of completing the VAT filing process but many people have experienced issues. Many of the well-known banks still do not recognise the GIBAN, which is the unique IBAN number allocated to every VAT registrant. I’m sure over time this will be resolved and making payment by bank transfer through your business account will be a quick and cost-effective method of clearing your VAT liability. Until then, there are several other options. I personally used Al Ansari Exchange and my payment was allocated to my FTA account within a few hours. They charge Dh21and need your Tax Registration Number, GIBAN, the company’s registered name and your Emirates ID. Another easy way to make payment is with a debit or credit card but there is a fee of 3 per cent for using a card.

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We are about to file our first VAT Return. Most of our clients prefer invoicing in US dollars but the accounting software we use automatically picks the exchange rates from XE.com for all currencies except dollars, where we fixed it to 3.675. We have now received a notification that we have to employ the currency exchange rate issued by Central Bank of UAE. So should we not use the rate of Dh3.675 to the US dollar. This rate has been agreed with all the clients and if we have to use the Central Bank's rate, then we might need to change all the contracts and revise the agreements and invoices that have already been issued. SK Dubai

Article 69 of the VAT Decree Law states that if the supply is in a currency other than the UAE dirham, then the amount stated in the tax invoice shall be converted into dirhams according to the exchange rate approved by the Central Bank at the date of supply.

The Executive Regulations say that for each good or service you must show the following on the invoice: the unit price, the quantity or volume supplied, the rate of tax and the amount payable expressed in AED. In addition, you must show the tax amount payable expressed in dirhams together with the rate of exchange applied where the currency is converted from a currency other than the dirham.

Invoicing in a currency other than dirhams effectively means that invoices have to be dual currency with each invoice line and associated VAT in both the agreed currency and dirhams. The legislation does not allow you to fix exchange rates, so your existing agreements will need to be revised. Look at all past transactions where you have used a fixed exchange rate and calculate if you have over or under reported VAT. If you have under-reported VAT, you should make an adjustment in your next VAT return. The Central Bank exchange rates for each day are now readily available and can be found on their website at www.centralbank.ae

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We are a manufacturing company specialising in stands for events in Dubai and we often have foreign customers that do not have a business registered in UAE. Our stand is delivered within the UAE depending on the location of the event, so my question is do we still have to charge them VAT? What is the correct procedure in this instance? Can they refuse to pay us VAT? LY Dubai

A company's obligation to charge VAT to its customers is governed by the UAE VAT legislation concerning place of supply. Once you have determined that your services are subject to UAE VAT, which in this instance they are, your customers have to pay UAE VAT regardless of where the recipient company is established and whether they can reclaim it. They cannot refuse to pay it. However, Article 67 of the Executive Regulations sets out how business visitors can reclaim UAE VAT incurred. In short they can make a refund claim once every 12 months and the claim must be Dh2,000 or more. On its website the FTA have issued a guide on how VAT may be reclaimed by business visitors and included the form to reclaim VAT paid. This can be found under Getting Help / Guides and Forms.

Lisa Martin, a chartered accountant with over 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