As a business owner, you may be considering whether to become a principal contractor. Reverse charge is a notion that the government has established to ensure that VAT in UAE is collected on products or services imported into the state of UAE and supplied there, even if the seller is not a taxable person. The recipient or buyer will be required to pay VAT in UAE in this situation because they are being treated as though they are making taxable supply for themselves.
Who Has the Responsibility Of Reverse Charge VAT?
The government has the responsibility of reverse charging VAT in UAE. The recipient is responsible for paying the tax to the government. This type of tax is imposed on goods and services that are considered to be high value. The government imposes this tax on the recipients of the goods and services to ensure that they are able to pay the taxes that are due.
The reverse charge VAT is also imposed on businesses that are considered to be high risk. This tax is designed to encourage businesses to comply with the tax laws. The government has the responsibility of collecting the taxes from the businesses that are required to pay them. The businesses that are required to pay the tax are responsible for ensuring that they pay the correct amount of tax to the government.
Does A Principal Contractor Charge On VAT In UAE?
Under the United Arab Emirates Federal Tax Authority’s (FTA) Standard VAT system, businesses are required to register for VAT if their taxable supplies and imports exceed the mandatory registration threshold of AED 375,000. A principal contractor is any company that carries out work on a construction project as the main contractor. The main contractor is responsible for the coordination of all subcontractors working on the project. In the UAE, the main contractor is required to charge VAT on the construction work carried out.
This includes materials, labor and other related costs. The main contractor is also required to submit a monthly VAT return to the FTA detailing the taxable supplies and imports made during the month. The return must be submitted by the 10th day of the following month. If you are a business that contracts with a principal contractor to carry out work on a construction project in the UAE, you will be required to pay VAT on any invoices received from the contractor.
You will also be required to account for this VAT in your monthly VAT return. If you are registered for VAT in another GCC country, you can claim back any UAE VAT paid on construction costs by submitting a refund application to the FTA. The refund application must be submitted within two years from the date of payment.
Role of Principal Contractors in Reverse Charge VAT
The Principal Contractor plays a vital role in the construction sector by ensuring that all work is carried out in accordance with the drawings, specifications and contract conditions. They are also responsible for the Health and Safety of all workers on site. The Principal Contractor must also ensure that all workers are properly trained and skilled in order to carry out their work safely and to a high standard.
In addition, the Principal Contractor must have a good working knowledge of Construction Design and Management Laws and regulations in UAE. These regulations place a duty on those in control of construction work to ensure the health and safety of those who may be affected by it. The role of the Principal Contractor is to ensure that all these responsibilities are met.
Purpose of Reverse Charge VAT in UAE
When transactions are made outside of the UAE, the Federal Tax Authority (FTA) finds it challenging to monitor VAT compliance and keep track of suppliers’ business operations. As a result, receivers who live in the UAE will be subject to a reverse charge for VAT in UAE. These payment options are primarily used in overseas transactions. Suppliers who do not reside in the UAE are not required to register or file a VAT return in the country where their customers are based.
As a contractor in the UAE, it is important to be aware of the changes in VAT law. The new Principal Contractor rule may have an impact on how you do business. Experts like Farahat and co with best UAE VAT consultants are here to help you understand these changes and guide you through the process. Please don’t hesitate to contact experts if you have any questions or need assistance from a VAT consultant in Dubai for your business’s .