Clarifying Place of Precedence of Principle

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 where certain conditions* are met.

1.    Amendment

Before 1 January 2023: The place of residence of agent follows that of the principal

1 January 2023 onwards: The place of residence of the principal follows that of the agent

2.    Agent’s activities in the UAE that will result in the principal having a place of residence in the UAE

A.    Agent regularly negotiates and enters into agreements in favor of the principal

B.    Agent maintains a stock of goods to fulfill supply agreements for the principal regularly

3.    Effect of having a place of residence in the UAE through an agent:

• Principal needs to comply with all tax obligations mentioned in the tax legislation
• Reverse charge principles will not apply where the principal has a place of residence in the UAE through an appointment of an agent.
• The supply of services by the agent to the principal will not qualify for zero-rating since the principal has a place of residence in the UAE

4.    How can Crowe help?

• Assessing whether the place of residence of the principal is regarded as the place of residence of the agent in UAE
• Determining the tax obligations of the principal once its place of residence is considered to be that of the agent in UAE