United Arab Emirates
GAZT had issued a guideline to provide practical information to taxable persons on how to manage transitional provisions.
Key Highlights of Transitional Provisions:
The Transitional provisions mainly provide specific guidelines on the following:
Contracts Entered with Government Entities
If any VAT Registered person in KSA has entered into a contract with Government entity, the GAZT guide confirms the following treatment.
| If the Contract is signed | Supply of Goods/Services | VAT Treatment |
| Before 11th May, 2020 | Before 1st July, 2020 | VAT will be applicable at 5%. |
| Supply will continue on or after 1st July, 2020 | 5% VAT will be applied till earlier of the following dates;
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| On or after 11th May, 2020 and before 1st July, 2020 | Before 1st July, 2020 | VAT will be applicable at 5%. |
| After 1st July, 2020 | VAT will be applicable at 15%. |
Contracts Entered Between two VAT Registered Businesses
If the contract is entered between two VAT Registered businesses, the GAZT guide confirms the following treatment.
| If the Contract is signed | Supply of Goods/Services | VAT Treatment |
| Before 11th May, 2020 | Before 1st July, 2020 | VAT will be applicable at 5%. |
| Supply will continue on or after 1st July, 2020AND
“Customer has the right to claim FULL Input Tax Credit” |
5% VAT will be applied till earlier of the following dates;
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|
| On or after 11th May, 2020 and before 1st July, 2020 | Before 1st July, 2020 | VAT will be applicable at 5%. |
| After 1st July, 2020 | VAT will be applicable at 15%. |
Tax Invoices Issued Prior to 1st July 2020
The guide sets out special transitional rules that would apply for supplies made on or after 1st July 2020 where the tax invoice has been issued prior to this date. The guide confirms the following treatment:
| If the date of Tax Invoice is | Supply of Goods/Services | VAT Treatment |
| Before 11th May, 2020 | On or after 1st July 2020, but before 30th June, 2021 | VAT will be applicable at 5%. |
| After 30th June, 2021 | VAT will be applicable at 15%. | |
| On or after 11th May, 2020 and before 1st July, 2020 | Before 1st July, 2020 | VAT will be applicable at 5%. |
| After 1st July, 2020 | VAT will be applicable at 15%. |
Periodic Tax Invoices Issued for Continuous Supplies
If a tax invoice issued for a continues supplies partially executed before and on or after 1st of July, a 5% VAT rate will be applicable to the invoice related to the part of supply executed before 1 July 2020 and a 15% VAT rate will be applicable to the invoice related to the part of supply executed on or after 1 July 2020.
Imported Shipments Placed Prior to 1st July 2020
VAT will be applied by the customs at 15% if the date of importation falls on or after 1st July 2020.
The 5% VAT applies only in case the importation fulfilled on or before 30 June 2020.
For customs purposes, importation will be considered as fulfilled if customs declaration has been made and goods have been cleared from the customs port.
Therefore, 15% vat rate applies to all shipments for which custom clearance is on or after 1st July 2020.
Article prepared by: Bhawna Chopra – Partner Tax Advisory – Premier Brains
This document is only for information purposes and should not be construed as an advice. It does not necessarily cover each aspect of the topic with which it deals. You should not act upon the contents of this document without receiving formal advice on your particular circumstances.
If you would like to discuss any VAT matters, please drop us an email at info@premier-brains.com or call us at + 971 4 3542959.