The Decree-Law No. 18-2022 regarding VAT was announced on the 28th of September 2022. It announced amendments to certain clauses that are in UAE Federal Decree-Law no. 8 of 2017 on VAT (Value Added Tax). The changes will take effect on January 1, 2023.
The total number of articles were modified and one article regarding the statute of limitations is added in the UAE VAT Law representing some important modifications to the Legislation.
The major amendments to UAE VAT Law – effective as of 1 1 Jan 2023 can be summarized as follows:
|Nature of Change
|The new definitions have been added to define Relevant Charitable Activities Pure Hydrocarbons Tax Evasion, Tax Audit Tax Assessment and voluntary disclosure.
|Services outside of the VAT scope
|A new clause was introduced to Article 7 stating the Executive Regulations could define any other services (other other than vouchers or the transfer of a business) as being to be outside the reach of UAE VAT Law.
|Goods are subject to zero-rate
|Additional products are included within the article 45 (clauses 4 5, and 6.) as being subject to the VAT at a zero rate. That includes import of the means of transport, the import of goods that are related to transportation and the import from rescue aircrafts and vessels.
|The recovery of VAT on inputs
|Two new clauses were included in Article 55 relating to the recovery of VAT on inputs. This defines the conditions for the taxpaying person to collect UAE VAT Law declared or paid on the import of goods and services.
|Adjustment to VAT for Output
|The tax adjustment for outputs stipulated by Article 61(1) is applicable to situations in which the tax payer uses a tax treatment that is not correct. In such situations the tax payer should present an tax credit note 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 UAE VAT Law is now the condition that the person who is liable must issue an tax credit note within 14 days of the date that one of the scenarios mentioned within Article 61(1) is observed.
|Payment of tax
|65(4) of the Constitution 65(4) obliges compliance for the tax payer to pay taxes to Federal Tax Authority (FTA) in the event that an individual issues an invoice for tax with VAT or an amount of UAE VAT Law.
|When to issue an invoice for tax
|Article 67(1) stipulates the date for the issuance of tax invoices in accordance with article 26 (date of continuous supply) to be 14 days after the date of supply.
|Exemption from VAT registration
|The article 15 on the exception to register is applicable to registered individuals in addition to those who are not registered. This applies in the event that their goods are not zero-rated, or if the company are no longer making supplies other in addition to zero-rated items.
|Date of supply in specific 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 that the service or product is offered being one of the factors that establish the time of the delivery.
|3. Clause 3 in Article 48 specifies that the reverse charge in the domestic market applies to pure hydrocarbons.
|Supply of goods and services in certain circumstances
|Article 30(8) concerning the location of supply in specific situations, has been amended to state that the location of supply for transportation-related services is the location where transportation commences.
|The place of residence of the principal
|The article 33 defines the location of residence for a principal to be the home for the agent. Under the current VAT Law, it was stipulated that the principal’s the agent’s residence will be the residence that of the principal.
|Article 36 on the specific rule against avoidance regarding values of supplies or the import of items and services between closely related parties will now prevail over article 37 (value of supply deemed to be).
|Introduction of a new Article on the statute of limitations
|The article that has been added to the statute of limitations also covers other instances:The limitation period of 5 years does not apply in cases in which the FTA has issued a notification to audit the taxpayer in the event that the audit has been completed in four years after the date of the issuance in the form of a notice.
If the taxpayer is required to make a voluntary disclosure during the 5th year following the date of the applicable tax year the statute of limitations is prolonged by one calendar year.A voluntary disclosure can’t be made by the tax-paying taxpayer following the expiration of five years after the expiration of the relevant fiscal period.The article further mentions the possibility of extended time periods. further be modified under an additional Cabinet Decision.
It is suggested to look over changes added in the VAT Decree-Law and ensure readiness before the date of effective 1 . January 2023. This change will result in an amendment to the use of VAT on certain goods (e.g. the purchase of Hydrocarbons, the transport means or transport equipment, etc. ) and the timeframe of the issue of a tax invoice/tax credit note and ways of keeping records and documents for an extended time.
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