A Comprehensive List of UAE VAT Law Changes You Must be Wary of in 2023
January 1st 2023 not only marks the dawn of a new year but also represents the completion of five years of Value Added Tax (VAT) in the UAE. However, taxable persons should also note that a set of major changes to the VAT Laws would take effect on that date. This means you cannot sit complacent during the New Year, as you must ensure that you are adequately prepared to ensure VAT compliance in the UAE in line with the new amendments.
Adapting to the new changes can be tough for taxable persons but VAT consultants in the UAE can make it easier. Here is a list of UAE VAT Law changes you must be wary of in 2023:
1. Extended Times for FTA’s Tax Audits in the UAE
Generally, a tax audit for a monthly/quarterly tax period cannot be carried out after the expiration of five years from the end of such a tax period. As per the new amendments, the statute of limitation of five years doesn’t apply if the Federal Tax Authority (FTA) has issued a notice to audit the taxable person, provided such an audit is completed within four years from the date of issuance of the notice.
2. Tax audit after Voluntary Disclosure
If a voluntary disclosure is filed in the fifth year from the end of the relevant tax period, the statute of limitation will be extended by one year. This means the FTA will get an additional year to carry out the tax audit in the UAE. However, taxable persons are not allowed to submit a voluntary disclosure after the lapse of five years from the end of the relevant tax period.
3. Tax Audit in the Case of Tax Evasions
In the event of Tax Evasion, the FTA can carry out a Tax Audit or issue a Tax Assessment within 15 years from the end of the Tax Period in which the Tax Evasion occurred. Tax evasion is now defined as “a Person’s use of illegal means, resulting in the reduction of the amount of the Due Tax, non-payment thereof, or a refund of Tax that the Person did not have the right to have refunded.”
4. Exception from Tax Registration in the UAE
The FTA can exempt a Taxable Person from Tax Registration whether a Registrant or not, upon his request if his supplies are only subject to the zero rates. Consult with VAT consultants in Dubai for further guidance on this matter.
5. VAT Treatment of Director’s Services
Before the amendment, services provided by directors (be they natural persons or legal persons) were treated as a supply of services for the purpose of VAT in the UAE. However, from January 1st 2023, the services provided by a director will not be treated as a supply of service under the UAE VAT provided the services must be rendered by a natural person for a remuneration (monetary or in-kind), on a Board of Directors of any government or private sector entity.
This is a huge relief for individuals performing their function as a member of a board of directors. They can cheer, as the remuneration received by them to perform the director’s functions will be outside the scope of VAT.
6. Goods subject to zero-rate
Additional goods have been listed in the amended UAE VAT Decree-Law as subject to zero-rate of VAT. This includes the import of means of transportation, import of goods related to means of transportation and import of rescue planes and ships.
7. Reverse Charge Mechanism
The Amended provisions state that the domestic reverse charge will apply to Pure Hydrocarbons (defined in the new Decree-Law as “any kind of different pure combinations of a chemical equation made only of hydrogen and carbon”).
8. Timeline to Issue a Tax Invoice
The amended VAT Decree Law specifies the date of issuance of tax invoice under Article 26 (date of continuous supply) to be 14 days from the date of the supply.
Hire the Best VAT Consultants in Dubai, UAE
Taxable entities need to consider the new amendments to the VAT Law before the changes take effect. Ignoring the changes in the UAE VAT Law may lead to compliance failure and associated penalties. The assistance of the best VAT consultants in Dubai such as Jitendra Chartered Accountants (JCA) can help you to comply with the new changes. JCA has an FTA-approved tax agent who can assist the director board members in the entire process. Consult with JCA today to ensure complete VAT compliance in the UAE without any hassle.