The Decree-Law No. 18-2022 regarding VAT was announced on the 28th of September 2022. It announced amendments to a few aspects in the UAE Federal Decree-Law no. 8 of 2017 on VAT (Value Added Tax). The changes will take effect on January 1, 2023.
In all, 24 articles were modified and one article regarding the statute of limitations has been added to UAE VAT Law representing some important modifications to the Legislation.
The major amendments to UAE VAT Law – effective on the 1 day Jan 2023 are as follows:
|Nature of Change
|The new definitions have been added in relation to Relevant Charitable Activity Pure Hydrocarbons Tax Evasion Tax Audit Tax Assessment and voluntary disclosure.
|The supply of goods outside the VAT scope
|A new provision has been included in Article 7 stating the Executive Regulations could define any other supply (other than the provision of vouchers or transfers of business) as being to be outside the reach of VAT.
|Goods that are subject to zero-rate
|Additional products are included under Article 45 (clauses 4 5, and 6.) as being exempt from the VAT at a zero rate. It includes import of the means of transportation, import of products that are related to transportation and the import of aircrafts for rescue and ship.
|Input VAT recovery
|Two new clauses were included in Article 55 relating to the recovery of VAT on inputs. This stipulates the conditions for the taxpaying person to claim back VAT that was declared or paid on the import of goods and services.
|Adjustment of VAT output
|The tax adjustment for outputs stipulated under Article 61(1) refers to the situation when the tax-payer employs an improper tax treatment. In such situations the tax payer must present an acknowledgement of tax credit to increase the output tax.
|When is the best time to issue an tax credit note
|Article 62(2) regarding the mechanism for adjusting output VAT has been amended to include the condition that the tax payer must issue an tax credit note within 14 days of the date that any of the situations mentioned under Article 61(1) is observed.
|Payment of tax
|65(4) of the Constitution 65(4) stipulates that it is mandatory for the tax payer to pay tax to the Federal Tax Authority (FTA) in the event that an individual issues an tax invoice with VAT on it , or receives the amount in UAE VAT Law.
|The timeframe for issuance of an tax invoice
|Article 67(1) stipulates the date for the issuance of tax invoices in accordance with the Article 26 (date of continuous supply) to be 14 days following the date of supply.
|The VAT registration exemption is not required.
|The provisions of Article 15 regarding the exemption to register will be applicable to registered people in addition to those who are not registered. This is the case when their products are zero-rated or if they are no longer making supplies other that zero-rated.
|Supply date in certain instances
|26(1). Article 26(1) determining the date of supply in certain circumstances is the date at which the year is one-year since the date when the service or product is supplied in addition to other circumstances that establish the time of the delivery.
|The clause 3 in Article 48 specifies that the reverse charge in the domestic market will be applicable to Pure Hydrocarbons.
|Supply in specific circumstances
|Article 30(8) concerning the location of supply in certain instances, states that the source of supply for transportation-related services is the location where transportation begins.
|The place of residence of the principal
|The article 33 defines the the residence of a principal as having to be the home for the agent. Under the current UAE VAT Law, it was stipulated that the principal’s the agent’s residence must be the principal’s residence. that of the principal.
|Article 36 on the specific anti-avoidance rules regarding values of supplies or the import of products and services between closely related parties will now take precedence over the Article 37 (value of supply deemed to be).
|New Article introduced regarding the statute of limitations
|The latest article on the statute of limitations also covers other instances: The limitation period of five years does not apply to situations in which the FTA issued a notice to audit the tax-paying person provided that the audit can be completed in four years from the date of issue in the form of a notice. If the taxpayer makes a voluntary disclosure within the 5th year after the date of the applicable tax year the statute of limitations is increased by one year. Voluntary disclosure is not able to be filed by a tax-paying taxpayer after the expiration of five years following the expiration of the relevant fiscal period. The article further states that these extended times can be further amended by the Cabinet’s separate Decision.
It is suggested to look over modifications added by the UAE VAT Law and ensure readiness before the date effective 1 . January 2023. This change will result in changes in the use of VAT on certain goods (e.g. the purchase of Hydrocarbons, the transport means and other transportation equipment, etc. ) The timeframe for the issuance of a tax invoice or tax credit, and ways of keeping records and files for a long time
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