FTA Publishes New Amendments to the UAE VAT Executive Regulations

Taxpayers in the UAE need to be aware of the new changes in the UAE VAT regime set to be effective from January 1^st 2023. The Federal Tax Authority (FTA) has published the UAE Cabinet of Ministers’ Decision No. 99 of 2022 amending the Executive Regulation of the Federal Decree-Law No. 8 of 2017 on Value Added Tax (“the UAE VAT Executive Regulations”). The Decision amends the VAT treatment of director’s services in the UAE along with record-keeping provisions for the e-commerce companies.

Since the new amendment will have a significant impact on your business, it is advisable to consult with tax consultants in Dubai at the earliest to take the necessary actions. The below blog will give you a detailed look at the new amendments to the Executive Regulation of the Federal Decree-Law No. 8 of 2017. Read ahead and gain actionable insights:

A Quick Shot of the Amended Provisions

Taxpayers need to be aware of the significant amendments to the Executive Regulation of the Federal Decree-Law No. 8 of 2017 so that they can plan their next course of action. Tax agents in Dubai can assist you with advice on the amendments. The following are some of the provisions amended by the Cabinet of Decision No. 99 of 2022.

Article 3: Supply of Services

The Cabinet Decision No 99 of 2022 has added a new clause to Article 3 of the Executive Regulation of the Federal Decree-Law No. 8 of 2017 on Value Added Tax. The newly added Clause 2 states that “the functions of a member of a board of directors, performed by a natural person appointed as such, for any government entity or private sector establishment, shall not be considered a supply of Services.”

The new VAT amendment to Article 3 of the Executive Regulation of the Federal Decree-Law No. 8 of 2017 effectively eliminates the obligation for independent directors to apply for VAT registration in the UAE and charge VAT on their remunerations (directorship fee). Similarly, there would be no obligation for the registrant in the UAE to account for VAT under the reverse charge mechanism when receiving directors’ services from non-resident directors.

Clause 3 of Article 72 – Record Keeping of the Supplies Made

There is an amendment to Clause 3 of this article which adds more clarification regarding the record-keeping requirements. It says that if the Taxable Person who makes any Taxable Supply of Goods or Services does not have a Fixed Establishment in the State, the following shall apply:

1. If he has a Place of Establishment in the State, he must keep records of the transaction to prove the Emirate in which the Place of Establishment is located
2. In the event that he does not have a Place of Establishment in the State, he must keep records of the transaction to prove the Emirate in which the supply is received

Clause 4 of Article 72 – Record Keeping of the Supplies Made

As an exception to Clause 3, Clause 4 states that if the value of the Taxable Supplies made by the Taxable Person through electronic commerce exceeded AED 100,000,000 during the calendar year, that person must keep records of the transaction to prove the Emirate in which the supply is received in the period specified in Clause 6 of this Article

Clause 5 of Article 72 – Record Keeping of the Supplies Made

This clause gives more clarity to the term ‘electronic commerce for the purpose of Clause 4 of Article 72 of the Executive Regulation of the Federal Decree-Law No. 8 of 2017. It defines electronic commerce as the process of selling Goods or Services through electronic means, an electronic platform, a store in social media, or electronic applications in accordance with criteria and conditions determined by the Ministry of Finance.

Clause 6 of Article 72 – Record Keeping of the Supplies Made

This clause has also been introduced for the purpose of Clause 4 of Article 72. Its states that the provisions of Taxable Supplies via electronic commerce will apply to a Taxable Person in the following ways:

• From the first Tax Period that begins on or after 1 July 2023 for 18 months for the Taxable Person whose Taxable Supplies made via electronic commerce exceeded the threshold prescribed in Clause 4 of this Article during the calendar year ending 31 December 2022
• For two years commencing from the first Tax Period of the calendar year that begins after the date on which the Taxable Supplies made by the Taxable Person through electronic commerce exceeded the threshold prescribed in Clause 4 of this Article

Quick Advice from VAT Consultants in Dubai, UAE

VAT consultants in Dubai advise all the taxable persons affected by the amendments to review their current methodologies and tax compliance strategies. Tax agents in Dubai such as Jitendra Chartered Accountants (JCA) can help businesses to review their tax strategies in line with the new amendments.