Advances basically mean

  1. lending money or
  2. Part or full payment made for a transaction before the actual date of payment.
  3. Security of a transaction in a liquid form.

Decree-law and executive regulation do not specifically provide for VAT on advance payment received. However, Decree-law provides for the date of supply on which tax shall be calculated.

As specified tax shall be calculated on the date earliest of any of the following dates:

  1. The date on which Goods were transferred, if such transfer was under the supervision of the supplier.
  2. The date on which the Recipient of Goods took possession of the Goods, if the transfer was not supervised by the supplier.
  3. Where goods are supplied with assembly and installation, the date on which the assembly or installation of the Goods was completed.
  4. The date on which the Goods are Imported under the Customs Legislation.
  5. The date on which the Recipient of Goods accepted the supply, or a date no later than (12) months after the date on which the Goods were transferred or placed under the Recipient of Goods disposal, if the supply was made on a returnable basis.
  6. The date on which the provision of Services was completed.
  7. The date of receipt of payment or the date on which the Tax Invoice was issued.

Clause 7 above states the date of supply will be the date of receipt of payment if the date of receipt of payment is the first incident that occurs. Implying that advance received is subject to VAT.

As part payment received in advance is not covered above, it is difficult to ascertain the applicability of VAT on part advance payment for the supply of goods or services. However, the guide published by the FTA on return filing states “Deposits received as part payment” to be included under standard rated supplies.

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The entire contents of this article is solely for information purpose and have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation.. It doesn't constitute professional advice or a formal recommendation. The author has undertook utmost care to disseminate the true and correct view and doesn't accept liability for any errors or omissions. You are kindly requested to verify & confirm the updates from the genuine sources before acting on any of the information's provided herein above.

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