Chetan Suri

<ol style="list-style-type:upper-alpha"> <li><strong>VAT FORM 211- Voluntary disclosure form</strong></li> </ol> <p>Federal Tax Authority has introduced VAT FORM 211- Voluntary disclosure form. This will help a taxable person to rectify the errors which they have committed while filing VAT Return.</p> <p><strong>Summary:</strong></p> <ol> <li>Where a Taxable person identifies error or omission in VAT return, he can login to FTA and fill the form 211.</li> <li>Form 211 shall be filed where a Taxable person makes an error/ omission/wrong treatment of Tax by which the output Tax payable and input Tax receivable is more than AED 10,000/- for a particular period.</li> <li>In form 211, figures which are already filed in form 201, shall be mentioned as &lsquo;reported&rsquo;. This shall give option to edit the figures in a separate box &lsquo;as current&rsquo;. Net Tax box shall also get change.</li> <li>Furthermore, reason for the discrepancy shall also be disclosed. Relating supporting documents with detailed reasons for discrepancy shall be uploaded.</li> <li>There shall be two types of penalties. Fixed penalty of AED 3,000/- for the first time and subsequently 5,000/- shall be levied. Percentage based penalties shall also be levied where Taxable person has disclosed less than actual Tax in return and subsequently uses form 211. It can be 5%/ 30%/ 50% (as specified).&nbsp;</li> <li>Where discrepancy is less than 10,000/-, there is no need of filing form 211, discrepancy can be adjusted in next Tax period in adjustment box of Return form 201.</li> </ol> <p>&nbsp;</p> <p><strong>&nbsp; &nbsp;B Public Clarification on VAT on compensation type payments</strong></p> <p>Here the concern is related to the applicability of VAT on compensation made by one party to another for any omission, loss or wrongdoings.</p> <p><strong>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; A contractual payment to compensate for loss</strong></p> <p style="margin-left:.75in">Where a payment is made for an early termination of a contract or a late performance, such payments are not considerations for provision of a supply. Such payments are out of scope of VAT.</p> <p style="margin-left:.75in">However, where a hotel allows a customer to cancel a booking, such cancellation charges shall come under the ambit of VAT.</p> <p><strong>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; A payment to settle a dispute</strong></p> <p style="margin-left:.75in">When a payment is made to enforce a contractual term, it shall be consideration for supply. For instance, where a dispute regarding a price of goods is settled by requiring a contractual recipient of the goods to make a payment for these goods, payment will be consideration for the supply of the goods and therefore subject to VAT.</p> <p style="margin-left:.75in">However, where a payment is in the nature of damages or compensation for any loss suffered by a party, payment is not consideration of supply and outside the scope of VAT.</p> <p style="margin-left:.75in"><strong>A fine or penalty</strong></p> <p style="margin-left:.75in">Fines or penalties are not consideration for any supply and therefore outside the scope of VAT.</p> <p style="margin-left:.75in"><strong>Payment for damaged goods</strong></p> <p style="margin-left:.75in">Where a person has damaged or lost goods belonging to another person, it may be required to make a payment to compensate for the damage or loss. Such payments are not consideration and therefore outside the scope of VAT.</p> <p style="margin-left:.75in">However, where a customer breaks a good and is obliged to take title to it, the payment the customer makes would represent consideration for a supply of goods, and so would be subject to VAT.</p> <p style="margin-left:.75in">&nbsp;</p> <p><strong>&nbsp; C Profit Margin Scheme- eligible goods</strong></p> <p>&nbsp; It is important that businesses properly identify those goods which qualify to be sold under the profit margin scheme.</p> <p><strong>Summary:</strong></p> <ol> <li>Only those goods which have previously been subject to VAT before the supply in question may be subject to the profit margin scheme.</li> <li>Thus, stock on hand of used goods which were acquired prior to the effective date of VAT, or which have not previously been subject to VAT for other reasons, are not eligible to be sold under the profit margin scheme.VAT is therefore due on the full selling price of such goods</li> <li>Goods includes: a)Second hand goods, meaning tangible moveable property that is suitable for further use as it is or after repair; b) Antiques i.e. goods that are over 50 years old; c) Collectors&rsquo; items i.e. stamps, coins, currency and other pieces of scientific, historical or archaeological interest.</li> <li>Conditions to apply for profit margin scheme:</li> </ol> <ol style="list-style-type:lower-alpha"> <li>The goods must have been purchased from either: -</li> </ol> <p style="margin-left:1.0in">A person who is not registered for VAT; or</p> <p style="margin-left:1.0in">a taxable person who calculated VAT on the supply by reference to the profit margin i.e. a VAT registered business which already applied the profit margin scheme on the same goods.</p> <p>&nbsp; &nbsp; &nbsp; &nbsp;5.The taxable person made a supply of the goods where input tax was not recovered in accordance with Article 53 of Cabinet Decision No. 52 of 2017.</p> <p>&nbsp; &nbsp; &nbsp; &nbsp;6. A taxable person will not be allowed to apply where he has issued a tax invoice or any other document mentioning an amount of VAT chargeable in respect of the supply.</p>