The United Arab Emirates (UAE) introduced a Value Added Tax (VAT) system on January 1, 2018, which requires businesses to comply with certain record-keeping requirements in order to recover VAT paid on their expenses. Recently, Article 55 of the UAE VAT law has been amended to specify the evidence required to be kept in order to recover input tax on the import of goods and services. As a result, businesses must now keep invoices for imports, similar to the requirement for a valid tax invoice to recover input tax on local purchases.
This new legal requirement emphasizes the importance of ensuring that the foreign supplier's invoice is received and booked prior to recovering VAT on import, which was not previously a legal requirement. For goods in particular, the invoice may be received after the actual import of goods, making it crucial to monitor this process carefully. A thorough reconciliation of the values automatically populated in Box 6 of the VAT return for import VAT incurred on imported goods and strong governance around this aspect of compliance is essential.
To be entitled to recover input tax on imports, taxpayers may need to request overseas suppliers to issue invoices at an earlier stage. This will ensure that they meet the new legal requirements and can recover the input tax they are entitled to.
In conclusion, the amendment to Article 55 of the UAE VAT law highlights the importance of maintaining proper records and invoices for imports. Businesses must now ensure that they receive and book invoices prior to recovering VAT on import, and strong governance and thorough reconciliation is necessary for compliance. By meeting these legal requirements, businesses can ensure that they recover the input tax they are entitled to while avoiding any potential penalties for non-compliance.
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