UAE Amendments to the VAT Decree-Law

United Arab Emirates (UAE): Amendments to the VAT Decree Law under Federal Decree Law No. 18 of 2022

On 26 September 2022, the President of the UAE, H.H. Sheikh Mohamed Bin Zayed Al Nahyan issued the Federal Decree-Law No.18 of 2022 amending certain provisions of the Federal Decree-Law No. 8 of 2017 on Value Added Tax (the VAT Decree Law). The amendments will take effect from 1 January 2023.

The key amendments are as follows:

• Definitions

  Article 1 – Additional definitions for Relevant Charitable Activity, Pure Hydrocarbons, Tax Evasion, Tax Audit, Tax Assessment, Voluntary Disclosure and Tax Procedures Law.

• Out-of-scope supplies

  Article 7 – Other supplies that shall be outside the scope of VAT will be specified in the Implementing Regulations.

• Exception from registration

  Article 15 - Registered Taxable Persons may also apply for an exception from registration.

• Tax Deregistration

  Article 21 – The Authority may deregister a registrant where it deems necessary to keep the safety of the tax system.

• Continuous supplies

  Article 26 – The date on which (1) year has passed from the date the goods / services are provided shall be one of the events to determine the date of supply.

• Transport-related services

  Article 30 - The place of supply for transport-related services shall be where the transportation starts.

• Agent’s place of residence

  Article 33 - The place of residence of the agent will follow that of the principal in certain cases.

• Value of supply

  Article 36 - The value of supply rule for related parties shall take precedence over the value of deemed supply provided under Article 37.

• Zero-rated imports

  Article 45 – Importation of means of transport and related goods, aircrafts and vessels for rescue and assistance, crude oil and gas, and related goods to preventive/basic healthcare shall be zero-rated.

• Reverse charge

  Article 48 - Expands the power of the Cabinet to determine additional goods or services which may be subject to reverse charge mechanism.

• Recovery of input tax on imports

  Article 55 – Documents to recover input tax:

  • Import of goods – invoice and import documents
  • Import of services - invoice

• Gov’t & Charitable Institutions

  Article 57 - Input tax for Sovereign Activities (for Government Entities) or Relevant Charitable Activities (for Charitable Institutions) shall be recoverable.

• Output tax adjustment

  Article 61 - Tax treatment applied incorrectly shall give rise to an output tax adjustment.

  Article 62 - Tax Credit Note shall be issued within 14 days from the instance of any output tax adjustment.

• Receipt of tax

  Article 65 – Where a person receives an amount as Tax or issues a Tax Invoice for it, he shall be obligated to remit the Tax Due to the Authority.

• Issuance of tax invoice

  Article 67 – Tax Invoice should be issued within 14 days from date of supply, even for special cases of date of supply provided under Article 26

• Statute of Limitations

A new article on the Statute of Limitations prescribing certain exceptions to the 5-year timeframe for FTA to conduct its tax audit or issue a tax assessment, such as where:

• FTA has notified the taxpayer of the commencement of audit before the expiration of the 5 years period, provided it shall be completed within 4 years from date of notification of tax audit

• It relates to a Voluntary Disclosure (VD) submitted in the 5^th year from the end of the tax period, provided then it shall be completed within 1 year from date of submission of VD

• It relates to tax evasion or non-registration, the prescriptive period for the FTA to audit or issue an assessment is within 15 years from the date tax evasion occurred or date required to register.

Key Takeaways

• The above amendments emphasize the necessity for taxpayers to re-assess their current VAT position and practices and ensure preparedness for the transition on 1 January 2023.

• Taxpayers are encouraged to seek the help of professionals to ascertain how the amendments will impact their businesses.