The UAE’s Federal Tax Authority (FTA) has clarified the criteria that determine whether it is the supplier or end-consumer that bears the cost of the Value Added Tax (VAT) on goods and services set to be delivered fully or partially in 2018, but had been contracted before the implementation of VAT.

The FTA clarified that according to Federal Decree-Law No. (8) of 2017 on Value Added Tax and the Executive Regulations, the only case where consumers are directly responsible for paying VAT on received services that are delivered fully or partially after VAT went into effect, is where the contract, issued before January 1, 2018, states that the amount due is exclusive of tax, reported Emirates news agency Wam, citing an FTA statement.

Suppliers will be liable for VAT in two cases: If the contract states that the amount received against the good or service is inclusive of VAT; or if the contract issued to the consumer did not refer to VAT.

In the latter case, if the recipient is registered for tax, the amount due is treated as exclusive of tax and the supplier would have needed to ascertain whether the recipient is registered and the recipient ability to recover tax as per Article 70 of the VAT ER.

The Authority stressed that in all cases, the supplier remains liable for accounting for the tax and paying it to the FTA.