Transitional rules in VAT
Special rules will be provided to deal with various situations that may arise in respect of supplies that span the introduction of VAT. For example:
- Where a payment is received in respect of a supply of goods before the introduction of VAT but the goods are actually delivered after the introduction of VAT, this means that VAT will have to be charged on such supplies. Likewise, special rules will apply with regards to supplies of services spanning the introduction of VAT.
- Where a contract is concluded prior to the introduction of VAT in respect of a supply which is wholly or partly made after the introduction of VAT, and the contract does not contain clauses relating to the VAT treatment of the supply, then consideration for the supply will be treated as inclusive of VAT. There will, however, be special provisions to allow suppliers to charge VAT in situations where their recipient is able to recover their VAT but where there is no VAT clause.
Treatment of insurance in VAT
- Generally, insurance (vehicle, medical, etc) will be taxable. Life insurance, however, will be treated as an exempt financial service
How will financial services be treated under VAT?
- It is expected that fee based financial services will be taxed but margin based products are likely to be exempt.
How will Islamic finance be treated under VAT?
- Islamic finance products are consistent with the principles of sharia and therefore often operate differently from financial products that are common internationally.
- To ensure that there are no inconsistencies between the VAT treatment of standard financial services and Islamic finance products, the treatment of Islamic finance products will be aligned with the treatment of similar standard financial services.