Do we still pay VAT for services already paid for in 2017?

I recently had a debate with my local gym and looking if anyone has answers to the following about VAT.

I paid for a gym membership (a service) in full on 1st January 2017 for 18months contract. Now with the new law implemented, the gym requires me to pay VAT from 1st January 2018.

I understand that any services paid for from 1st January 2018 will include 5% vat but what if a service has already been paid for in full in 2017 and the terms are still being carried out?

The problem that I am facing is; they froze my membership, I cannot use the gym, I still have another 6 months lefts on my contract and contractually, they will not issue a refund unless I pay the VAT.

For me, its more of the principle of what is right and wrong, I have no issues paying the VAT but, should we be paying for VAT for a service that has already been paid for in full in 2017 however gets carried out into the following year?

Dubai | 👁 849 | Posted February 8, 2018 | Share on Facebook | Twitter | Google+

| Modified: February 8, 2018 | Author:


Adinair94 2 years ago

Thats correct, but in this case invoicing was done in 2017 itself, so OP is not liable to pay VAT now. Likely accountants mistake to recognize revenue on a monthly basis.

haiimelmo 2 years ago

In fitness first they gave us an free month of membership with the VAT payment which came up to 43 Aed which was a fair enough deal

wazaaaaaaa 2 years ago

in this case VAT is applied on date of import of goods to UAE, which is probably in January

carlh999 2 years ago

What makes it worse is, if they knew, they should have warned their customers upfront. The fact your friend already paid upfront for those PT sessions, should have been entitled to a refund if he didn't want to continue. A gym cannot freeze the remainder sessions and force a customer to pay VAT. He could even argue, he could have got those lessons cheaper elsewhere if he knew VAT was going to be included!

carlh999 2 years ago

Yes, totally agree!

carlh999 2 years ago

Thanks for the feedback. The only clause that is does mention The management reserves the right to periodically review our prices, charges and fees and implement these accordingly It doesn't mention tax but if anything, this is the clause they would defend themselves on. But assuming I don't want to continue this membership, I am unable to receive a refund, nor can I access the gym until I pay eitherway, I feel I am forced to pay the additional amount otherwise i lose the remainder of my 6months :-|

carlh999 2 years ago

This is exactly what I would have thought, I have enquired to the Consumer rights department and they will get back to me in a couple of days.

eyezview 2 years ago

Actually, contracts can be amended. they can put that vat is already inclusive or exclusive in the current contract. It is up to you if you agree with it. All contracts now should be reviewed. Your gym should have been informing people about this since last year since it is going to happen so customers' accounts would not have to froze. VAT will be collected on the services provided starting Jan 1 2018, so the remainder of your contract will be charged with VAT by the FTA and your gym will be paying.

ExposeBadPeople 2 years ago

It seems that your gym is dividing membership payments on a monthly basis, for accounting purposes, even if they were paid in full, which is NOT your problem. You signed a contract with them, they have to follow it. If they choose not to follow it, they must refund you the full amount, not the remaining balance. Even if you were paying on a monthly basis, if its a contractual agreement, they must follow it. Just because they have a dumb accountant, who didn't make preparations for this, doesn't mean the customers should pay the price!! I would complain to every possible body there is about this.

kulugo 2 years ago

during our VAT training conducted by PwC, the general rule would be based on invoice date. If it was invoiced before 1-Jan-2018, then it should not include VAT. If service or item has been received in 2017 but invoiced in 2018, then VAT is applicable. This is what I understood.

grinningdevil 2 years ago

Once invoicing is done for any product or services, if the invoice says 31st dec or before, there's no 5% vat involved...even if the product or services are consumed after 1st Jan

vanting_too_much 2 years ago

Friend of mine works in a gym here and he knew this was coming for members on the 1st. Where he works the management company checked back and forth with the FTA and it was confirmed that any outstanding membership period needs to have VAT applied even if paid for in full like the above example. He also stated this included if you were half way through a PT session of say 10, with 5 taking place after Jan 1st - VAT must be added. They knew was going to upset a lot of members, but were held to rights by the FTA rules.

cyberkada 2 years ago

Same ordered something on Souq from Amazon on December 31st. Came today. Aramex guy said I own 5% VAT.

jamesam444 2 years ago

Generally, VAT is a tax on consumption of goods or performance of a service. For services it is due at the earliest of 1) Receipt of Payment 2) Actual performance of the service 3) Issuance of Invoice As per these rules and the UAE VAT law, your GYM NEEDS TO ACCOUNT for VAT on the services provided by them in 2018 only. Not for anything in 2017, which would be against the law. Now be mindful that they need to account for it irrespective of when they receive the payment, but whether or not they can charge you for it, depends on your membership contract with them. If it doesn't allow, you are entitled to push back and even complain to the DED and FTA regarding their actions. However, if they had previously communicated (officially) to you regarding the VAT or the contract allows them to do so, then it would be better off for you to pay it ONLY on the portion straddling over to 2018. Also, when you check your contract, try ans look for a tax specific clause, in the absence of which they are not capable of charging you VAT. I hope this helps! All the best!

kapri123 2 years ago

Depends. If it was paid in fully in 2017 the no, if half is paid in 2017 and half is in 2018 then yes, you pay the VAT, because the invoice or whatever will be dated this year

bravo632 2 years ago

As far as I'm concerned if you already paid in full, meaning they do not deduct the amount on a monthly basis - then there is no way they can make you pay for VAT. Could you highlight this to Consumer Rights & let us know what they say? I'm curious myself. Also check the contract you've signed with them before anything.

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