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VAT for MEP Companies

MEP Management is an industry-specific activity which covers business activities starting from the contract creation to the completion. MEP companies are cash-driven in nature, frequent cash influx is a necessary part of its functioning. Project management is a crucial part of this sector.  It consists of project management and works scheduling systems which enhance workforce productivity. MEP industry covers the following activities: 

* Inventory control

* Project management

* Asset schedule

* Resource allocation 

Introduction on VAT

In the UAE Companies are required to register for VAT, if the total value of all the supplies and imports (taxable turnover) exceeds the mandatory threshold of AED 375,000 in the previous 12-month period or if it expects the turnover to exceed AED 375,000 in the next 30 days. A company can voluntarily register, if the total taxable turnover or expenses subject to tax, exceeds the voluntary threshold of AED 187,500 in the previous 12-month period or if it expects to exceed AED 187,500 in the next 30 days.

People involved in MEP activities

  1. Building Developer: Acquirer of the land who hires contractors for the building purposes.
  2. Contractor: He carries out the construction activities and he takes full responsibility for the process.
  3. Sub-contractor: sub-contractors includes specialised persons plumbers, electricians, painters, and bricklayers for completing MEP works.

Key points on VAT services in MEP companies

1. Construction service provided will be a zero-rated service if it is exported outside the UAE.

2. Sub-contractors may not be registered for tax due to turnover not reaching the threshold limit for mandatory registration.

3. Small contractors voluntarily register on reaching the threshold limit

4. VAT charged on the payments associated with:

  • Construction services
  • Retention sum
  • Deposits

5. Under reimbursement instances: a supply that is liable to VAT if the building developer purchases the materials for the contractor and recovers the material cost from the contractor, then the developer must charge VAT on the recovery of cost obtained.

6. Under disbursement instance: a supply that is not liable to VAT if the building developer is only facilitating the payment by the contractor to the supplier. 

7. Payment made to compensate for the suspension for work is not charged under VAT

8. Time of supply is calculated based on the earlier happening of:

  • Date of an invoice issued
  • Due date of payment shown on the invoice
  • Date of payment made

Why a Tax auditor or Consultant plays a Vital role in MEP Companies

Tax auditors play a major role in MEP companies since they work as a subcontracting company to the construction industry. Tax auditors help in:

  • Documenting the billing and collection activities within the operations
  • Tax planning and avoids penalties
  • Tax refunds and guidance to reduce tax liability
  • Analyse the risks associated with the tax payments and provide mitigation measures

How CDA helps you?

Each business transaction needs to be analysed, in order to ensure that they are classified correctly for VAT treatment. Our CDA experts help you to file your VAT returns timely. Our VAT services on MEP companies include:

VAT Registration

The entire process of VAT registration takes place on an online platform. In order to attain a tax registration number (TRN), CDA experts help to file the VAT registration form online and submit the essential documents required.

VAT Calculations and Return Filing

Before calculating VAT, your business must comply with rules to avoid any penalty. VAT return depicts the tax amount due for a particular tax period. We prepare vat return filing on 201 forms and submit it in the FTA portal on receiving the approval from the client.

VAT Implementation and Compliance

Compliance with UAE VAT law is a complex task. We assure you to follow each law concept and file the tax timely.

VAT De-registration

It is the process of cancellation of TRN. Deregistration occurs when the taxable supplies fall less than the threshold limit as prescribed by FTA.

Filing reconsideration form for VAT penalties

Before submitting reconsideration forms you must pay the previous penalties and wrong filing fines. VAT penalties in UAE must be paid on time with FTA for smooth tax life.

CDA Services

CDA is highly specialised in providing VAT services for MEP companies. We serve a good number of MEP clients within and across the UAE. All our experts are qualified from well-established accredited international bodies and highly professional in handling the clients. Our services include Bookkeeping & Accounting, VAT Consultancy, CFO Services, Management Accounting and Internal Audit.

Frequently Asked Questions [FAQ]

1. Will input tax be offset to output tax on the VAT return filings?

Yes, Input tax is usually recovered through the tax return itself by offsetting it against the output tax If input tax is greater than output tax declared, the taxable person is entitled to a refund.

2. Can non-resident MEP enterprises recover input VAT?

Non-residents MEP companies of the GCC territory allowed to apply for a refund under the following conditions:

  • They do not supply goods or services for which they are liable to pay VAT in the refunding country.
  • They are registered for VAT/GST in their country of residence.
  • The VAT has been paid in the course of carrying out their business activities.

3. When can I claim my input tax?

If you have missed out any bill in the previous filling or the vendor submitted the invoice late, FTA allows you to claim the input tax in the next subsequent period.

4. Under what circumstances VAT incurred on expenses cannot be claimed?

VAT is not deductible for non-taxable supplies. Customs duty cannot be claimed for payment of VAT. In some cases, input tax cannot be recovered. E.g.: Staff entertainment expenses

5. How much do you charge for VAT Services?

VAT Service charges depend on the turnover and the number of transactions on supply.

6. How is VAT applicable if multiple trade licenses are available?

Under common control but not common ownership Group VAT registration is applicable at FTA.

7. What are the categories in Zero-rated Supplies?

Zero percent VAT: This category includes goods and services listed for export and international services, precious metals, certain education, and health services and supplies, residential properties that are newly constructed and supplied within three years.

8. Is there a bad debt relief treatment?

Yes, bad debt relief scheme can be availed by the supplier if the following conditions of Article 64 of the Federal Decree-Law are satisfied:

  • If the supplier writes off the receivable amount as bad debts from the books of accounts.
  • On notifying the customer that the amount of consideration has been returned off.
  • Receivable amount must be more than six months old from the date of supply.

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