The Decree-Law No. 18-2022 on VAT was announced on the 28th of September 2022, announcing changes to certain clauses that are in UAE Federal Decree-Law no. 8 of 2017 on VAT (Value Added Tax). The changes will take effect beginning 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 main amendments to UAE VAT Law – effective as of 1 1 Jan 2023 are as follows:
| Nature of Change | Amendment |
| Definitions | Definitions are added in relation to Relevant Charitable Activity Pure Hydrocarbons Tax Evasion Tax Audit and 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 the transfer of a business) as being not to fall within the scope of UAE VAT Law. |
| Goods that are subject to zero-rate | Additional products are included under Article 45 (clauses 4 5, 5 and 6.) as being exempt from the VAT at a zero rate. That includes import of vehicles for transportation, import of products associated with transportation and the import from rescue aircrafts and vessels. |
| Input VAT recovery | Two new provisions have been included in Article 55 concerning the collection of VAT on inputs. This stipulates the conditions for the taxpaying person to claim back VAT that was declared or paid upon the importation of goods or services. |
| Adjustment of VAT output | The adjustment for output VAT outlined by Article 61(1) refers to the situation in which the tax payer employs an improper tax treatment. In such situations the tax payer should immediately issue an tax credit note to reduce the tax on output. |
| The deadline for issuance of the tax credit note | Article 62(2) regarding the procedure for adjustment of output VAT is now the condition that the tax payer must issue tax credit notes within 14 days of the date when one of the scenarios mentioned within Article 61(1) occur. |
| Payment of tax | 65(4) of the Constitution 65(4) stipulates that it is mandatory for the taxpayer to pay taxes to Federal Tax Authority (FTA) in the event that the person is issued an tax invoice with VAT on it , or receives the amount in VAT. |
| The timeframe for issuance of an tax invoice | Article 67(1) defines 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. |
| Exemption from VAT registration | The article 15 on the exception to register will be applicable to registered individuals in addition to those who are not registered. This applies when their products are zero-rated, or if the company do not produce any other supplies that zero-rated. |
| Date of supply in specific circumstances | The article 26(1) determining the date of supply in particular circumstances, includes the date that an entire year passed since the date that the service or product is supplied being one of the factors that decide the supply date. |
| Reverse charge | 3. Clause 3 in Article 48 specifies that the reverse charge for domestic use will be applicable to Pure Hydrocarbons. |
| Supply of goods and services in certain instances | Article 30(8) about the place of supply in certain instances, states that the source of supply for transportation-related services is the location where transportation commences. |
| The place of residence of the principal | The article 33 defines the the 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 must be the residence for the principal. |
| Supply value | Article 36 on the specific rule against avoidance regarding values of supplies or the import of products and services between closely related parties will now prevail over the Article 37 (value of supply deemed to be). |
| New Article introduced on the statute of limitations | The article that has been added to the statute of limitations extends to additional instances:The limitation period of 5 years does not apply to situations in which the FTA has issued a notification to audit the taxpayer 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 following the date of the applicable tax year the statute of limitations is increased by one year.A voluntary disclosure can’t be made by the tax-paying taxpayer after the expiration of five years after the expiration of the relevant fiscal period.The article further states the possibility of extended time periods. be further amended by the Cabinet’s separate Decision. |
It is recommended that you review changes that have been made by the UAE VAT Law and ensure readiness prior to the effective date of the 1st of January, 2023. This change will result in changes in the use of VAT to certain services (e.g. the supply of hydrocarbons, import of transport vehicles and other transportation equipment, etc. ) and the timeframe of the issuance of a tax invoice or tax credit, and how to keep records and files for a long time.
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