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VAT Update: Changes to the Real Estate Guide

14 October 2018

The UAE Federal Tax Authority has updated the VAT real estate guide. Most of the changes are small but there are some useful clarifications and simplifications in connection with the date of supply generally and the date of supply for retention payments.

The guide confirms that, where retentions are deducted from the periodic payments due under a construction contract, the date of supply for the retention will be the earlier of:

  • The time the retention payment has been made;
  • The issue of a tax invoice in relation to the retention; or
  • 12  months  from the  date  the  work  has  been  signed  off  (or certified) as  complete 

Until the construction services are considered to be contractually complete, VAT is not due on the retention unless one of the above events occur.

If construction services are rendered as a single supply (ie there will be a single invoice at the end of the job rather than a series of payments during the project) the date of supply for the retention will be triggered on the date the services are completed (or on the date of issue of the tax invoice or receipt of payment if earlier).

In cases where the customer withholds the retention permanently due to snags identified in the construction, VAT is not due on the retained amount. If VAT has been accounted for earlier then the supplier may consider using the bad debt relief provisions (if he considers the payment is still due) or a credit note (if he accepts the payment is not due at all) to credit the VAT overpaid.

Please find the updated guide here