- A question about the VAT implications on a four-year equipment lease invoiced through eight semi-annual invoices led to hours of tax discussions, highlighting the complexity and fascination of taxation.
- VAT is calculated based on the date of supply of goods or services, which can be the date of issuance of a tax invoice, payment due date, receipt of payment, or expiration of one year from the date the goods or services were provided.
- For long-term contracts, the challenge arises at the expiration of one year, with uncertainty about whether VAT becomes immediately payable on the entire remainder value.
- The absence of apportionment in the ‘date of supply’ provisions could trigger VAT liability for the entire remainder value. In leasing transactions, the transfer of the right to use the property occurs at a point in time, not over a period of time.
- The current UAE VAT provisions do not refer to specific scenarios, and could apply to all instances of continuous services.
Source Gulfnews.com
