A Guide to New Amendments to UAE VAT Decree Law

The UAE has introduced the Federal Decree-Law No.18 2022 amending some provisions of the Federal Decree-Law No. 8 2017 on Value Added Tax (the VAT Law). Although the amended law has been issued on September 26th, 2022, it will come into effect from January 1st 2023. Businesses can consult with VAT consultants in Dubai to understand how the amendments will affect their tax strategies and plans.

Apart from the major amendments, a new article on the statute of limitation was added to the UAE VAT Law. You are advised to seek advice from tax agents in Dubai before making any decision based on the new law. The below blog will give you a glimpse into the changes in the new UAE VAT Law:

New Article on Statute of Limitations

Article 79 (bis) has introduced the statute of limitation to the UAE VAT Law. As per the new UAE VAT Law, the statute of limitation of five years is not relevant to cases in which 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.

In situations where the taxable person files a voluntary disclosure in the fifth year from the end of the relevant tax period, the statute of limitation will be extended by one year. After the lapse of five years from the end of the relevant tax period, a taxable person is not allowed to file a voluntary disclosure. If you have a concern with the statute of limitation, connect with FTA-registered tax agents in Dubai.

Changes in Definitions

The new VAT Law in the UAE has made some changes in the definitions of tax-related items. New definitions were introduced for Relevant Charitable Activity, Pure Hydrocarbons, Tax Evasion, Tax Audit, Tax Assessment and Voluntary Disclosure.

Supplies Outside the Scope of VAT

The amended UAE VAT Law contains a new clause added to Article 7. It states that the Executive Regulations may stipulate any other supplies (other than the supply of vouchers and the transfer of a business) that are explicitly considered outside the scope of VAT.

Exception from VAT Registration in the UAE

Article 15 of the UAE VAT Law states that:

“The Authority may exempt ?? a Taxable Person from Tax Registration whether a Registrant or not, upon his request if his supplies are only subject to the zero rate”.

Businesses can consult with VAT consultants in Dubai to determine if they qualify for an exception from VAT registration.

Date of Supply in Special Cases

Article 26 (1) of the UAE VAT Law is about determining the date of supply in special cases. As per Article 26 (1) of the UAE VAT Law,

“the date of supply of Goods or Services for any contract that includes periodic payments or consecutive invoices shall be the earliest of any of the following dates:

  1. The date of issuance of any Tax Invoice
  2. The date payment is due as specified on the Tax Invoice
  3. The date of receipt of payment
  4. The date of expiration of one year from the date the Goods or Services were provided”

Place of Supply in Special Cases

Article 30(8) regarding the place of supply in special cases now includes a major change in transport-related services. Article 30 (8) states that:

“For the supply of transportation Services or Transport-related Services, the place of supply shall be where the transportation starts. The Executive Regulation of this Decree-Law shall specify the place of supply for transportation Services and Transport-related Services if the trip includes more than one stop”

Place of Residence of a Principal

Article 33 of the amended UAE VAT Decree-Law defines the place of residence of a principal as the place of residence of the agent. This is different from the current VAT Law, which states that the place of residence of the agent shall be the place of residence of the principal. As per Article 33:

“The Place of Residence of the principal shall be considered as being the Place of Residence of the agent in any of the following cases:

  1. If the agent regularly exercises the right of negotiation and enters into agreements in favour of the principal.
  2. If the agent maintains a stock of Goods to fulfil supply agreements for the principal regularly.”

Value of Supply

Article 36 for the value of supply or import of goods and services between related parties will now override Article 37 (value of deemed supply). Article 36 states:

“The value of the supply or Import of Goods or Services between Related Parties shall be considered equal to the market value if all of the following conditions are met:

  1. The value of the supply is less than the market value
  2. If the supply is a Taxable Supply and the Recipient of Goods or Recipient of Services does not have the right to recover the full Tax that would have been charged on such supply as Input Tax”

Goods Subject to Zero-Rate

Article 45 of the new UAE VAT Law has introduced additional goods that are subject to zero-rate of VAT. This include

“ Supply or Import of air, sea and land means of transport for the transportation of passengers and Goods as per the criteria and conditions specified in the Executive Regulation of this Decree-Law (Article 4).

Supply of Goods or Services, or Import of Concerned Goods, related to the supply of the means of transport mentioned in Clause 4 of this Article and which are designated for the operation, repair, maintenance or conversion of these means of transport (Article 5)

Supply or Import of air or sea rescue and assistance aircraft or vessels (Article 5)”

Reverse Charge Mechanism

Clause 3 of Article 48 states that the domestic reverse charge will apply to Pure Hydrocarbons.

Recovery of Input VAT

Article 55 of the VAT Law now contains two new clauses regarding the recovery of input tax. It specifies the requirements for the taxable person to recover VAT paid or declared on the import of goods or services.

Recovery of Input VAT by Government Entities and Charities

The new UAE VAT Law states that government entities can recover input VAT incurred for the provision of sovereign activities. Charitable organisations can also recover input VAT incurred for the provision of relevant charitable activities. As per Article 57:

“Without prejudice to the general provisions of Input Tax recovery, Government Entities and Charities entitled to recover the full amount of Input Tax shall be determined in a Cabinet Decision issued upon the recommendation of the Minister, according to the following:

  1. Input Tax paid by the Government Entity for the purposes of its Sovereign Activities.
  2. Input Tax paid by the Charity for the purposes of its Relevant Charitable Activity.”

Output VAT Adjustment

Output VAT can be adjusted if the taxable person applies an incorrect tax treatment, which is a new scenario in the VAT Law (Article 61 (1)). However, in such situations, the taxable person must issue a tax credit note to adjust the output tax (Article 62 (2)).

Payment of Tax

Article 65(4) states that “Any Person receiving an amount as Tax or issuing a Tax Invoice in respect of an amount, must pay such amount to the Authority, and this amount shall be regarded as being similar to Due Tax under the provisions of this Decree-Law.”

Timeline to Issue a Tax Invoice

Article 67(1) states that a tax registrant is required to issue a Tax Invoice within 14 days from the date of supply. Consult with VAT consultants in Dubai to ensure prompt issuance of tax invoices.

Consult with the Best VAT Consultants in Dubai, UAE

Entrepreneurs need to be aware of the new amendments to the UAE VAT Law and assess how they will affect their businesses. The best VAT consultants in Dubai such as Jitendra Chartered Accountants (JCA) can help taxable businesses to understand the impact of the new changes to the VAT Law.

We are one of the top tax consultants in Dubai serving clients of a wide range of industries. JCA’s tax agent in Dubai is approved by and registered with the FTA. We can provide robust VAT services in Dubai such as VAT accounting, VAT filing, VAT refunds, VAT reconsideration etc. Talk with us if you need any help on any tax-related matters.