Re-charge on Salik & Traffic Fine
In Rent a Car business, we pay Salik & Traffic Fine on behalf of customers and same recover from them with admin fee. We do not charge VAT on Salik & Traffic Fines but only recover the same amounts and charge VAT on admin fee only.
Is this fine as understand both of Sovereign fee & just recovering the same ? Or need to treat as Re-imbursement?
Replies
As the beneficiaries of the Salik/recipient of Traffic fines are the users of the vehicle, rental companies can be considered as a mere agent for the purposes of settlement of these Government fees. Considering this if only the actual amount is recovered by the rental companies, the same can be treated as a Disbursement with no VAT impact. However since this treatment can be contested by taking a narrow view of the public clarification of Disbursement V Reimbursement and due to lack of official clarification from the FTA, as a prudent measure, it is advisable to seek a Technical Clarification from the Authority itself. There is already an article on GCC FinTax discussing this very same topic - https://www.gccfintax.com/articles/vat-on-the-recovery-of-salik-a-dilemma-between-reimbursement-and-disbursement-1275.asp
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