The Decree-Law No. 18-2022 on VAT was released on 28 September 2022. It announced amendments to certain clauses in the 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 major amendments to UAE VAT Law – effective on the 1 1 Jan 2023 are as follows:
| Nature of Change | Amendment |
| Definitions | Definitions of HTML0 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 introduced to Article 7 stating the Executive Regulations could define any other supply (other other than vouchers or transfers of business) as being not to fall within the scope of UAE VAT Law. |
| Goods are subject to zero-rate | Additional items are included within Article 45 (clauses 4 5, and 6.) as being exempt from the UAE VAT Law at a zero rate. It includes import of vehicles for transportation, import of products associated with transportation and the import from rescue aircrafts and ship. |
| The recovery of VAT on inputs | Two new provisions have been introduced to Article 55 relating to the recovery of VAT on input which defines the conditions for the taxpaying person to collect VAT declared or paid on the import of goods and services. |
| Adjustment of VAT output | The adjustment for output VAT outlined under Article 61(1) is applicable to situations in which the tax payer uses a tax treatment that is not correct. In these situations the tax payer should immediately issue an acknowledgement of tax credit to increase the output tax. |
| When is the best time to issue the tax credit note | Article 62(2) regarding the mechanism for adjusting output VAT has been amended to include the condition that the person who is liable must issue tax credit notes within 14 days of the date when any of the situations mentioned under Article 61(1) occur. |
| Payment of tax | 65(4) of the Constitution 65(4) obliges compliance for the tax payer to pay tax to the Federal Tax Authority (FTA) when an individual issues an invoice for tax with VAT on it , or receives an amount of VAT. |
| When to issue an tax invoice | 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 following the date of supply. |
| Exemption from VAT registration | The provisions of Article 15 regarding the exemption to register is applicable to registered individuals as well as non-registered individuals. 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 circumstances | 26(1). Article 26(1) determining the date of supply in particular circumstances, includes the date that the year is one-year since the date when the service or product is supplied being one of the factors that establish the time of the delivery. |
| Reverse charge | The clause 3 in Article 48 specifies that the reverse charge for domestic use applies to pure hydrocarbons. |
| Supply of goods and services in certain instances | 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 location of residence for a principal to be the residence that of an agent. Under the current VAT Law, it was stipulated that the the agent’s residence must be the residence that of the principal. |
| Supply value | Article 36 on the specific anti-avoidance rules regarding worth of supply, or the import of items and services between parties will now take precedence over the Article 37 (value of supply deemed to be). |
| Introduction of a new Article on the statute of limitations | The latest article on statute of limitations also covers other instances:The limitation period of five years does not apply in cases in which the FTA has issued a notification to audit the tax-paying person provided that the audit has been completed in four years from the date of issue in the form of a notice. If the tax payer makes a voluntary disclosure within the 5th year after the date of the applicable tax year the statute of limitation is increased by one year.A voluntary disclosure is not able to be filed by a tax-paying taxpayer after the expiration of five years after the expiration of the relevant time period for tax.The article further states that these extended times can be further amended by an additional Cabinet Decision. |
It is recommended that you review changes that have been made in the VAT Decree-Law and ensure readiness prior to the effective date of the 1st of January, 2023. The amendments will bring about an amendment to the use of VAT to certain services (e.g. the purchase of Hydrocarbons, the import of transport vehicles or transport equipment, etc. ) The timeframe for the issuance of a tax invoice or tax credit, and ways of keeping records and documents for an extended time.
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