Need of Amendment of Rental & Service Contracts
The Contracts that issued by many companies for rendering service after the implementation of Value Added Tax on January 1, largely face addressing the problems that could arise from the introduction of Value Added Tax. Most of the contracts issued regularly without any contractual value added tax and many contracts will run across the implementation dates.
So contracts should clearly state whether the price is inclusive or exclusive of a value-added tax. In case of commercial rental contracts, if the contract says the rent is exclusive of tax then the tenant must pay. If the contracts state that the rent inclusive of VAT then the landlord must pay.
A silent contract means that it makes no mention of the VAT. We advise business people to adhere while issuing contracts in future that they should incorporate a VAT clause into it and for old contracts they need to check and see if there is a VAT Clause.
Service providers such as DU & Etisalat may ask their clients to revise the contract adding the VAT clause if there is a 2 years contract covering the VAT period. With effect from January 1 2018, everyone who has a mobile phone contract, television package, or similar kind of service contracts and AMC shall pay 5% of their contract amount.