What is Time of Supply Rule under VAT in UAE
Supply time refers to the time required to pay VAT. This is a mechanism used to determine the point in time at which a company’s taxable transactions generate taxable amounts. The supply time is also called the supply date.
Just as determining whether supplies are taxable is as important as determining the applicability of value-added tax, so too is determining the time of supply for companies to understand the period within which they need to pay output VAT to the government.
You may be wondering-why is the supply time so important to the business? As a company, I provide goods, charge customers VAT, and I know the date when VAT is charged. This is not enough to determine the tax period by which I have to pay VAT to the government.
The answer is no’.
Let us consider a scenario to understand why the supply time or supply date is important to the business?
March 10, 2018: Received my customer’s supply order
March 20, 2018: Confirm the order and receive the advance payment (10% of the value of the goods)
April 1, 2018: Issue an invoice to the customer, and provide the supply details and applicable value-added tax
April 5, 2018: The goods have been delivered to the customer
April 10, 2018: Receive full payment (remaining 90%) from customer, including VAT
Let us assume that you need to submit a VAT return on a quarterly basis, that is, March-18, 2018, April-June, 2018, and July 9, 2018.
If you look closely at the above chart, a supply transaction includes multiple dates that span three VAT refund periods.
Now, considering the above, what is the supply time?
With an easy-to-understand understanding, you may think that the full payment and value-added tax have not been received until July 10, 2018, so the delivery time will be from July 10, 2018. Another taxpayer may think this should be the actual delivery date, which is April 5, 2018, and so on. Even in the context of providing services, this ambiguity does exist.
In order to eliminate the above ambiguity, and to specify a specific date for taxpayers and tax administrations to quantify the amount of tax payable during the refund period, the UAE VAT Law provides for the concept of “replenishment time”.
The concept of supply time provides a way to determine the supply date by listing various dates related to the supply of goods or services. The earliest occurrence of any such activity should be regarded as the time of provision of taxable goods or services. Therefore, taxpayers need to report and remit VAT within an appropriate return period.
The supply time in the following business scenarios is discussed below:
1. Supply time
2. Supply time for imported goods
3. Delivery time during assembly or installation
4. Supply time for continuous supply or progressive billing
5. Approval time of supply or return/consignment time.
6. Availability of vouchers and vending machines
Commodity supply time
The following are the dates of the VAT liability for the supply of goods:
Commodity supply
The earliest below
The date of the transfer of the goods (if such transfer is under the supervision of the supplier). If not under the supervision of the supplier, this date is the date when the consignee owns the goods.
Payment receipt date This means that you have received the payment date of the taxable supply, which also includes advance receipts.
The date of the tax invoice The date the tax invoice was issued. The last date for tax payment is within 14 days from the date of supply.
Supply time for imported goods
Import of goods
Date the goods were imported according to customs regulations.
Service supply time
Service provision
The earliest below
Service Completion Date The date the service was completed.
Payment receipt date This means that you have received the payment date for taxable supplies, which also includes advance receipts.
The date of the tax invoice The date the tax invoice was issued. The last date for tax payment is 14 days from the date of supply.
Delivery time during assembly or installation
Assembly or installation
The completion date of assembly or installation.
Supply time for continuous supply or progressive billing
Continuous replenishment or progressive billing
The earliest below
Tax invoice date
The payment date is as shown on the tax slip
Payment date
Note: Only applicable when regular payments or continuous invoices do not exceed one year from the date of providing such goods and services.
Source time for approved sale or source time for return/consignment.
Approve sale/return/consignment sale
The earliest below
The date the recipient accepted the supply of goods.
The expiration of 12 months from the date of delivery by the supplier or the expiration of the goods disposed of by the recipient.
As the supply time
Regarded as supplies
The earliest below
Date deemed provided
Disposal date
Usage change date
Voucher and vending machine supply time
Voucher and vending machine supply time
The earliest below
Date of issue or supply of voucher thereafter (redeem voucher)
The date the vending machine collects funds from the machine
The concept of time of supply is very important for companies to determine the VAT due date for supply, and it then helps to pay VAT within the corresponding VAT refund period. Any difference in determining the timing of supply will have a significant impact on the company’s cash outflow. Incorrect determination of the timing of supply will result in delays in tax payment, which will result in fines, or you may eventually pay taxes in advance, which will affect your cash outflow.