UAE VAT Law Amendments

The President of the UAE, H.H. Sheikh Mohamed Bin Zayed Al Nahyan has issued the Federal Decree-Law No.18 2022 in Arabic version amending some provisions of the Federal Decree-Law No. 8 2017 on Value Added Tax (the VAT Law). The amendments will be effective from 1 January 2023. The Federal Decree Law No 18 2022 has been issued on 26th September 2022 amending some provisions of the Federal Decree-Law No. 8 2017 on Value added Tax (the VAT Law).

We have given below the gist of the amendment for your perusal:

Definitions

The following new definitions are included:

• Pure Hydrocarbons
• Tax Evasion
• Tax Audit
• Tax Assessment
• Voluntary Disclosure

Supply of Goods : Articles 5(1) & 5(2) are replaced as follows-

5(1) - Transfer of ownership of the Goods or the right to use of them is replaced with ‘Transfer of ownership of the Goods or right of disposal of the Goods’

5(2) - Entry into a contract between two parties entitling the transfer of Goods at a later time is replaced with ‘Entry into a contract between two or more parties resulting in the transfer of Goods at a later time

New clause added to Article 7 : Supply in Special Cases- As an exception to Articles (5) ie Supply of Goods and (6) ie Supply of Services, the following shall not be considered as supply

‘Any other supply specified in the Implementing Regulations of this Decree-Law’

It is pertinent to note that supplies (other than the supply of vouchers and the transfer of a business) that are considered outside the scope of VAT.

Exception from Registration : As per the new amendment to Article 15 unregistered person can also be requested for exception from registration if his supplies are only subject to the Zero rate. Earlier only Registered Taxable person was entitled for request of exception.

Sub-clause inserted to clause 1 of Article 26 : Date of Supply in Special Cases

‘The date on which one year has passed from the date on which Goods or Services were provided’ – If Registered person does not issue Tax Invoice against supply of Goods or Services, the date of supply will be considered when one year completes from the date of Goods or Service were provided.

Amended Clause 8 of Article 30 – Place of Supply in Special Cases: Place of supply of transport-related services will be the place where the transportation starts

Amended Article 33 - Place of residence of a principal to be the place of residence of the agent.

Amendment to Article 36 : As an exception to Articles (34) ie Value of Supply and (35) ie value of Import, Article 37 ie Value of deemed supply added in case of related party transactions shall be considered equal to the market value

Following words highlighted in ‘RED’ are inserted in provision of clauses 4,5 and 6 to Article 45 (Supply of Goods and Services that is Subject to Zero Rate):

4. The Supply or Import of air, sea and land means of transport for the transportation of passengers and Goods as specified in the Executive Regulation of this Decree-Law.

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

6. The Supply or Import of aircrafts or vessels designated for rescue and assistance by air or sea

Article 48 (Reverse Charge): ‘Pure Hydrocarbons’ (any kind of different pure combinations of a chemical equation made only of hydrogen and carbon) is replace with ‘Hydrocarbons’

Article 55 (Recovery of Recoverable Input Tax in the Tax Period: Two new clauses are added regarding the recovery of input VAT which specify the requirements for the taxable person to recover VAT

paid or declared on the import of goods or services

Article 57 (Recovery of Tax by Government Entities and Charities):

The Government Entities and Charities entitled to recover the full amount of Input Tax paid by them; except for:

a.       Input tax paid by the Government Entities for the purposes of its Sovereign Activities;

b.       Input Tax paid by the Charities for the purposes of its Relevant Charitable Activity.

Article 61 (Instances and Conditions for Output Tax Adjustments): Registered person can adjust Output Tax if the Tax is charged, or the Tax treatment is applied incorrectly replaced with earlier provision ‘if the Tax was charged in error’

Article 62 (Mechanism for Output Tax Adjustment):  Condition for issuance of credit with within 14 days from the date on which any of the instances mentioned in Article 61(1) is newly inserted

Amended clause 4 of Article 65 (Conditions and Requirements for Issuing Tax Invoices): A person (registered or unregistered) issue a Tax Invoice stating VAT or receives an amount as VAT to be deposited with the Federal Tax Authority (FTA).

Article 67 (Date of Issuance of Tax Invoice):  The Registered shall issue a Tax Invoice within 14 days from the date of supply under Article 26 (continuous supply)

New Article (79) bis is added to the VAT Law with following provisions:

·      The statute of limitation of 5 years will not apply to cases where the FTA has issued a notice to audit the taxable person, provided such an audit is completed within 4 years from the date of issuance of the notice.

·      In the case where the taxable person files a voluntary disclosure in the 5th year from the end of the relevant tax period, the statute of limitation will be extended by one year.

·      A voluntary disclosure cannot be filed by the taxable person after the lapse of 5 years from the end of the relevant tax period.

·      In the case of Tax Evasion, the authority may conduct a Tax Audit or issue a Tax Assessment within 15 years from the end of the Tax period during which tax evasion occurred

·      In the event of non-Tax Registration, the authority may conduct a Tax Audit or issue a Tax Assessment within 15 years from the date on which Taxable person was required to perform tax registration.