UAE Amendment of the VAT Decree-Law

UAE Amendment of the VAT Decree-Law –

Effective From January 1st 2023

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Nov 03, 2022 / Haroon Juma / VAT & Tax Blogs

The Decree-Law No. 18 2022 on VAT was published on 28 September 2022 announcing amendments to some provisions of the UAE Federal Decree-Law No. 8 of 2017 on VAT (Value Added Tax). The changes will be effective from January 1, 2023.

In total, 24 articles were changed and one article on the statute of limitation was added to the UAE VAT Law representing some important changes to the Legislation.

The principal changes to the UAE VAT Law – effective from the 1st of January 2023 – are summarized below:

Nature of Change	Amendment
Definitions	New definitions are introduced for Relevant Charitable Activity, Pure Hydrocarbons, Tax Evasion, Tax Audit, Tax Assessment and Voluntary Disclosure.
Supplies Outside the Scope of VAT	A new clause has been added to Article 7 stating the Executive Regulations may define any other supplies (other than the supply of vouchers or transfer of a business) considered outside the scope of VAT
Goods Subject to Zero-Rate	Additional goods are listed in article 45 (clauses 4, 5 and 6) as subject to zero-rate of VAT. This includes the import of means of transportation, import of goods related to means of transportation and import of rescue planes and ships.
Recovery of Input VAT	Two new clauses have been added to Article 55 regarding the recovery of input VAT which specifies the requirements for the taxable person to recover VAT paid or declared on the import of goods or services.
Output VAT Adjustment	The output VAT adjustment stipulated in Article 61(1) covers the scenario where the taxable person applies an incorrect tax treatment. In such cases, the taxable person should now issue a tax credit note to adjust the output tax.
Timeline to Issue a Tax Credit Note	Article 62(2) on the mechanism for output VAT adjustment now specifies a condition that the taxable person must issue a tax credit note within 14 days from the date on which any of the instances provided in Article 61(1) occurs.
Payment of Tax	Article 65(4) requires mandatory compliance for the taxable person to pay the VAT to the Federal Tax Authority (FTA) in the event such a person issues a tax invoice stating VAT on it or receives an amount as VAT.
Timeline to Issue a Tax Invoice	Article 67(1) specifies the date of issuance of tax invoice under Article 26 (date of continuous supply) to be 14 days from the date of the supply.
Exception From VAT Registration	Article 15 regarding the exception to register will apply to registered persons in addition to non-registered persons. This is applicable if their supplies are zero-rated, or if they no longer make supplies other than zero-rated ones.
Date of Supply in Special Cases	Article 26(1) determining the date of supply in special cases includes the date on which one year has passed from the date on which the goods or services are provided, as one of the events to determine the date of supply.
Reverse Charge	Clause 3 of Article 48 specifies that the domestic reverse charge will apply to Pure Hydrocarbons
Place of Supply in Special Cases	Article 30(8) regarding the place of supply in special cases, now states that the place of supply of transport-related services will be the place where the transportation starts.
Place of Residence of a Principal	Article 33 defines the place of residence of a principal to be the place of residence of the agent. Under the current VAT Law, it was stated that the place of residence of the agent shall be the place of residence of the principal.
Value of Supply	Article 36 concerning the specific anti-avoidance rule for the value of supply or import of goods and services between related parties will now override Article 37 (value of deemed supply).
Introduction of New Article on Statute of Limitations	The new article on statute of limitations covers additional cases: 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 submitted by the taxable person after the lapse of 5 years from the end of the relevant tax period. The article also mentions that such extended periods can further be amended under a separate Cabinet Decision.

It is recommended to review amendments made to the VAT Decree-Law and ensure readiness by the effective date of 1 January 2023. The change implies a change in the application of VAT for certain supplies (e.g. supply of Hydrocarbons, import of means of transportation, etc.), the timeline of issuance of a tax invoice/tax credit note, and the procedures of keeping books and records for a longer period.

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