Amendment of the United Arab Emirates, UAE's VAT Decree-Law

The UAE Ministry of Finance has announced several changes to the Federal Decree-Law No.8 of 2017 on Value Added Tax (VAT). The new set of amendments has been added to Federal Decree-Law No. 18 of 2022. The new amendments will take effect on January 1, 2023. Businesses will find it difficult to adapt to the changes in the VAT Decree Laws because they are new to them. In this respect, it is advisable to seek assistance from any of the reputable tax advisors in the UAE. In this blog, we will discuss the main changes to the VAT Law.

VAT Decree-Law Updates

VAT Decree-Law no. 18 2022 was published in Arabic in the official gazette (no. 736 of September 28, 2022). A total of 24 articles of the VAT Law were amended, and one article on the statute of limitations was added. The following is a summary of the primary changes to the VAT Law:

• In the new Decree-Law, new definitions were introduced for "relevant charitable activity," "pure hydrocarbons," "tax evasion," "tax audit," "tax assessment," and "voluntary disclosure."

• If all of a registered person's taxable supplies are zero-rated or if they cease producing any other supplies besides zero-rated supplies, they are eligible to apply for a VAT registration exemption.

• The FTA has issued a notice to audit the taxable person, the 5-year statute of limitations does not apply if the audit is completed within 4 years of the date of the notice. Likewise, a 14-day deadline has been set for the issuance of tax credit notes to settle output tax following the tax invoice release deadline.

• Pure hydrocarbons are subjected to the domestic reverse charge.

• In cases when such a person issues a tax invoice stating VAT on it or receives VAT as payment, the taxable person is required to pay the VAT to the Federal Tax Authority (FTA).

• There will be no zero VAT on the import of transportation equipment, products connected to transportation equipment, and rescue aircraft and ships.

• Under certain circumstances, the FTA may forcefully deregister registered individuals if necessary.

• Input VAT incurred for the supply of sovereign functions may be recovered by government organizations.

• The place where the transportation begins shall be the location of the supply of transportation-related services.

• The VAT paid by charitable organizations to provide the necessary charitable services can be recouped.

• The exception to registration will apply to both registered and non-registered persons.

• The statute of limitations will be extended by one year if the taxable person makes a voluntary disclosure within 5 years of the conclusion of the applicable tax period.

• The taxable person cannot submit a voluntary disclosure after five years have passed since the conclusion of the pertinent tax period.

The above-mentioned are the important amendments to the VAT decree law that will come into effect in the UAE on January 1, 2023. The new amendments will be challenging for the business, and it is advisable to seek help from Reyson Badger, one of the top VAT advisors in the UAE. We are updated with the amendments and can help you run your business hassle-free.