Dubai Court VAT Ruling on Pre-2018 Contracts

When the UAE introduced VAT on 1 January 2018, it created confusion for industries working on long-term contracts — especially construction. Contractors and developers often signed agreements before VAT was implemented but continued supplying goods and services afterward.

A recent Dubai Cassation Court ruling (Case No. 685/2024) has now brought much-needed clarity. This decision confirms that VAT cannot be applied to supplies completed before 1 January 2018, even if invoices were issued or payments were received after that date.

This guide explains the ruling in detail, its impact on businesses, and the practical steps you should take today to stay compliant and avoid penalties.

VAT in the UAE – A Quick Refresher

VAT was introduced in the UAE under Federal Decree-Law No. 8 of 2017, effective from 1 January 2018.
Standard VAT rate: 5%.
Transitional issues arose for businesses with multi-year or milestone-based contracts.

The biggest question: Should VAT apply to goods and services supplied before 2018 if invoices or payments were processed afterward?

Learn more: Corporate Tax Registration in UAE: Complete Guide

The Landmark Dubai Cassation Court Case (No. 685/2024)

Facts of the Case

A contractor entered into a construction contract before 2018.
Some supplies and services were completed before 1 January 2018.
However, invoices for those supplies were issued only after VAT was introduced.
The Federal Tax Authority (FTA) initially demanded VAT on those invoices.

The Court’s Ruling

The Cassation Court ruled that:
👉 No VAT applies to goods and services completed before 1 January 2018, regardless of when invoices were issued or payments were received.

Legal Basis

Article 25 – Date of Supply
- Supply date = earliest of (i) delivery/completion, (ii) invoice issue, or (iii) payment.
- Court emphasized actual completion date before 2018 overrides invoice/payment date.
Article 80 – Transitional Provisions
- VAT applies only to supplies delivered after 1 January 2018.

Key Principle: The court followed a “substance over form” approach, focusing on when the work was actually completed — not administrative delays in invoicing.

What This Means for Contractors and Developers

Supplies Completed Before 2018

✅ No VAT applies.
Even if invoices or payments were processed in 2018 or later.

Supplies Delivered After 2018

❌ Standard 5% VAT applies.

Mixed Contracts (Milestones & Lump Sum Agreements)

For projects spanning 2017–2018:
- Work completed before 2018 = exempt from VAT.
- Work completed after 2018 = VAT payable.
Contractors must carefully allocate values to pre-2018 and post-2018 milestones.

Practical Guidance: How to Protect Your Business

The ruling is good news, but it also places responsibility on businesses to prove supply dates.

1. Documentation Checklist

To establish that supplies were completed before 2018, maintain:

✅ Work completion certificates
✅ Delivery notes
✅ Inspection/site reports
✅ Progress reports with dates
✅ Signed handover forms

2. Steps to Claim VAT Refunds

If you mistakenly paid or charged VAT on pre-2018 supplies:

Collect supporting documentation.
File a reconsideration request or VAT refund claim with the FTA.
Seek professional tax/legal assistance if amounts are significant.

3. Contract Review Strategies

Clearly specify dates of supply in contracts.
Use milestone-based billing with clear documentation.
Avoid vague “lump sum” contracts without timelines.

Beyond Construction – Who Else Is Affected?

Although the case focused on construction, the principle applies to all long-term contracts signed before 2018.

Industries Impacted

Consulting and professional services with multi-year contracts.
Leasing agreements signed pre-2018 but spanning into 2018.
Maintenance and facilities management contracts with recurring services.

Future Outlook – Avoiding VAT Disputes

Always document when supplies are delivered, not just when invoices are issued.
Expect FTA audits to focus on date of supply evidence.
Businesses should adopt a compliance-first mindset:
- Regular VAT reviews.
- Proactive contract updates.
- Consult tax experts during transitional tax changes.

Key Takeaways

Dubai Court ruling (Case No. 685/2024): No VAT on supplies completed before 1 January 2018.
Contractors and businesses can use this precedent to challenge past assessments and claim refunds.
Proper documentation is critical — without proof of supply dates, businesses remain at risk.

👉 For businesses with long-term contracts, this ruling is both a relief and a warning: relief that pre-2018 supplies are safe from VAT, and warning that future disputes will depend entirely on documentation and compliance.

Dubai Court VAT Ruling on Pre-2018 Contracts | Practical Business Guide

Dubai Court VAT Ruling on Pre-2018 Contracts: Practical Guide for Contractors and Businesses