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FTA has issued a clarification on treatment of re-imbursement and disbursement of expenses. In addition to that, FTA also issued clarification with respect to what constitutes disbursement and re-imbursement.
To identify a payment as a disbursement, following points will clarify:
- The key consideration is whether or not the expense belongs to the supplier’s customer.
- The other party (customer) should be responsible for making payment to the supplier from whom such expenses have incurred.
- The invoice should have been received by the other party (customer) and in its own name.
- The other party (customer) should authorize the company (i.e. the supplier incurring the expenses) to make a payment on its behalf.
- The goods/services paid for should be clearly in addition to the supplies made.
- The payment should be separately shown on the invoice and only the exact amount should be recovered.
To identify a payment as re-imbursement, following points will clarify:
- The company should have contracted for the supply of goods/services in its own name and capacity.
- The company should have received the goods/services from the supplier.
- The supplier should have issued an invoice in the name of the company and the company should be under the legal obligation to make payment for it.
- In the case of goods, the company should own the goods prior to making an onward supply to another party.
As per the clarification, disbursement of expenses claimed from the customer has to be treated as outside the scope of DubaiVAT Law. But, for this the key condition to be fulfilled is that the company that is incurring the expenses must have acted as an agent. However, for re-imbursement of expenses, is to be considered as within the scope of the Dubai VAT Law. And, for this the key condition is that the company that is incurring the expenses must have acted as a principal.