Income Accrual and VAT
Does accrual of any income in the books of accounts trigger a VAT liability?
Replies
ideally not. however you may need to comply with the date of supply rules if it is a continuous supply.
1 LikeBusinesses and business accountants need to understand the difference between financial accounting and VAT laws. In the UAE, generally International Financial Reporting Standards (IFRS) is the basis for financial accounting, whereas the VAT Laws & Regulations establish the rules for determining the time for recording and payment of the VAT. Revenue (including accrued revenue) is recognized based on the criteria spelled out under IFRS 15 for recognizing revenue. The VAT gets triggered by the time of supply rules of the Decree-Law and not with revenue recognition in the books of accounts. Advance received shall attract VAT as per the VAT laws and such advance is a liability as per the accounting principle. There needs to be a proper reconciliation of such differences.
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