Tax updates in UAE and around GCC - The Automotive Sector VAT Guide published by the FTA

The UAE’s Federal Tax Authority (FTA) has continued with publication of useful and informative guides covering various industry sectors. Recently (in June 2021) FTA introduced a new guide on automotive sector in accordance with Article 73 of the Executive Regulations issued under the UAE VAT law and provides general guidance with respect to business activities within the UAE’s automotive sector.

 

Who benefits from the guide:

The guide serves as a handy reckoner for players within the automotive industry such as:

• Suppliers of new cars.

• Suppliers of used/ second-hand cars.

• Leasing Companies.

• Car retailers.

• Exporters and importers of cars.

 

Coverage under the Guide:

The guide contains clarifications and VAT implications upon the below mentioned scenarios:

• Time of supply’ to be considered;

• Trade-ins’ and VAT treatment of the same

• Valuation criteria

• Profit Margin Scheme applicability.

• Warranty claims

• Treatment of reimbursement (Various government fees, SALIK etc.).

• Direct and indirect and Export of Cars.

 

Key Insights for the Automotive Industry:

Tax registered persons in the automotive sector and ancillary industries such as spares manufacturers, importers of genuine parts and automotive traders should revisit their transactions, in light of the new guidance and the explanations provided. It is advisable that the tax registered persons from the automotive sector assess if any traditionally followed processes need to be changed in terms of taxability, reporting or handling of documentation.    

Based on the pointers in the Guide, there can be many-an-area which would require a post-facto review.

 

How UHY JAMES can help

• Studying impact of the guidance and the clarifications therein on the VAT processes.

• Mapping changes as required in the tax processes of automotive industry players.

• Conducting post-implementation review.

• Seeking further clarification from FTA on behalf of industry players, as required on a case-to-case basis

 

Other developments

Dubai Customs launches Trader Export Report service

Dubai Customs, in cooperation with the Federal Tax Authority (FTA), has recently launched the Trader Export Report service.

VAT law was introduced in 2018 in the UAE and exporters (conducting direct exporters or through agents) have faced challenges in proving exports and claiming export benefits in absence of factual and documentary records. 

 

The new service will help clearing and shipping agents apply for VAT zero-rating of supply of goods exported within 90 days of exportation date, regardless of the Importation date.   This condition is in line with the FTA’s VAT law. Traders should meet all the zero-rating conditions including having an exit certificate and commercial documents that prove exportation process and exporting the shipment within the specified time frame. 

 

Additional information on this new development

The new service will apply to certain types of declarations including Import to Local from ROW, Import to Local from GCC (Statistical Import), Import for Re Export to Local from ROW, Import to CW from ROW, Transit (ROW to ROW) and Cargo Transfer from CTO to CH (Different Locations). 

 

As key players in the realm of audit, advisory, tax and risk consulting, we will strive to share relevant updates about changes in the UAE business landscape to help you navigate the regulatory changes and steer your business in the right direction.