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Abu Dhabi, UAEThursday 20 September 2018

VAT q&a: 'Why am I charged tax to pick up a parcel from the post office?'

A reader has paid twice to collect deliveries sent to the UAE from the UK

The reader wants to avoid paying tax twice on items bought in Australia and then posted to the UAE. Paulo Vecina/The National 
The reader wants to avoid paying tax twice on items bought in Australia and then posted to the UAE. Paulo Vecina/The National 

Why are we paying to collect parcels at the post office? The signs at the counter say it is to do with VAT. I’ve paid Dh22 and Dh17 to receive two parcels sent from England. It's outrageous. IG, Abu Dhabi

While consumers understand they are charged 5 per cent VAT on goods and services purchased within the UAE, it has come as an unpleasant surprise to many that they are also charged on purchases made outside of the UAE.

Article 49 of the Decree Law states that a person not registered for tax shall pay due tax on import of concerned goods from outside the implementing states on the date of import. This means all goods coming into the UAE will also have VAT charged on them if the retailer has not already charged the tax at the point of payment. This includes online purchases and even gifts delivered to the UAE. It has fallen to delivery companies and the post office to collect this VAT and remit it to the Federal Tax Authority.

If the package shows the value of the contents, VAT is calculated on that value. Delivery companies are also charging an administration fee to cover the costs involved in them collecting and remitting the tax.

Over time I believe we will see increasing numbers of nonresident retailers registering for UAE VAT and therefore you will be charged 5 per cent at the point of payment and not have to pay additional VAT and admin fees on collection in the UAE.

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We filed our first VAT return in April. Soon after, we realised we received money in 2017 for services provided in 2018, which we should have accounted output VAT on. We want to do the right thing and, if possible, avoid a penalty for this error - so, how do we inform the FTA and make a correction? OK, Dubai

The rules covering reporting tax return errors to the FTA are covered in Article 8 of Executive Regulation of Federal Law No. (7) of 2017 on Tax Procedures.

If the error results in payable tax being under-reported by Dh10,000 or more, you must make a voluntary disclosure to the FTA within 20 business days of identifying the error.

If the error results in payable tax being under-reported by less than Dh10,000 you should correct the error in the next tax return submitted after identifying the error. If you are not making any further tax returns, for example if you had since deregistered for tax, you need to make a voluntary disclosure to the FTA within 20 business days of identifying the error.

If you are making a voluntary disclosure, do not include the correction in the next VAT return.

You will see on the VAT return that there is a third column on the right-hand side titled adjustment. This column should be used only for adjustments relating to bad debts and sales of commercial property in the UAE. Any adjustment relating to under reporting of output VAT will be combined with current taxable sales and VAT on sales in the main boxes on lines 1a to 1g in the Amount and VAT Amount fields.

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Since retiring from full time employment I now act as an executive director to a number of UAE companies and receive various forms of payment from them for my services. I am receiving conflicting information as to the correct VAT treatment of these payments. Should I charge VAT on my fees? AS Abu Dhabi

The FTA issued a guide in April on this specific topic. Firstly, consider how much you receive in total from your directorships fees. If your fees exceed the mandatory registration threshold of Dh375,000 per annum, then you are obliged to register for VAT and then charge the tax on your services. You should not charge VAT if you are not registered, although you will be required to account for the tax if you should have registered and have not yet done so.

If your fees in a 12-month period are below Dh375,000, then you are not required to register.

Note that if you receive consideration for your services in a form other than paid fees, then these would also be included in assessing if you have reached the mandatory threshold. Other forms of consideration could include shares, share options, bonuses, goods and services in kind, such as accommodation, flights or expenses.

Once registered, you have to comply fully with the legislation account for VAT on all fees received whether monetary or non monetary.

The full guide can be found on the FTA website under the tabs Getting Help / Guides and Forms / Directors Services

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

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