Abu Dhabi has reversed its earlier decision on VAT that allowed retailers to round up prices for items that required change in low denomination coins.
The Department of Economic Development says it has made the decision after assurances from the UAE Central Bank that there are enough of the coins in circulation for retailers to give change, and that it would mint more if necessary.
Nine days ago the DED announced that charges could be rounded up by 20 fils on low cost items when the change required 10 and five fils coins.
Three days later, the Central Bank issued a statement describing its role as: “To monitor cash use in the market and supply banks with the quantities of coins they require to address the needs of their various customers.”
The bank added: “At the moment, the amount of coins including small denomination in the market is sufficient.”
Under the original ruling, a retailer selling an item for Dh1.05 including VAT would be able to charge customers Dh1.25.
Now paying for the same item will either require to buyer to have a five flls coin in their pocket or the seller to offer 20 fils in coins as correct change.
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[ Central Bank: Sufficient small coins circulating in UAE ]
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Khalifa Bin Salem Al Mansouri, the Undersecretary at the DED said the earlier decision had been cancelled as a response to calls from consumers to protect their rights in getting their change in fractions of a dirham.
In its announcement, the DED said it was responding after the: “Central Bank of the UAE confirmed that there are enough quantities of coin currency in the market, including the small denominations, and its readiness to re-minting any of the small denominations if the need arises.”
Mr Al Mansouri added that initial decision to permit rounding up was based on a reading of the VAT law that stated: “If the value imposed on imports was calculated and contained fils fractions, then the party who is subject to the tax may round the amount to the closest fils based on the principles of arithmetic rounding”.
Abu Dhabi said that over the weekend it had also held a workshop for inspectors to: “The method used by the Authority to collect the value added tax amount by documenting the business sector, its revenues and the costs of its operations, in addition to the importance of having it registered in the Authority’s tax system.”
The initial response to the fractions of VAT on smaller items was mixed. Some larger retailers like Carrefour said they would round up or down to the nearest 25 fils for cash only. Card charges would be for the exact amount.
The Fathima chain said it would be rounding prices down, and several smaller retailers, like corner shops, said they would decide on a case by case basis.
