UAE VAT Law Amendment Effective from 01.01.2023

HLB HAMT Tax Team

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    On September 26, 2022, President His Highness Sheikh Mohamed bin Zayed Al Nahyan issued the Federal Decree-Law No.18 of 2022, amending some provisions of the Federal Decree-Law No. 8 of 2017 on value-added tax (VAT).

    The effective date of amendments: January 1, 2023

    Below, we’ve outlined our opinions on the modified articles:

    Amended Article

    HLB Comments

    Article (1) – Definitions
    • Relevant Charitable Activities, Tax Evasion, Tax Audit, Tax Assessment, Voluntary Disclosures, Tax Procedures Law, and Pure Hydrocarbons now have new definitions.
    • A few minor additions, clarifications, and linguistic modifications have been made to the existing definitions.
    Article (5) – Supply of Goods
    • The definition of the supply of goods is expanded to include the instance wherein more than two parties enter into a contract entailing the transfer of goods on a later date.
    Article (7) – Supply in Special Cases
    • Article 7 has a new clause that states that the Executive Regulations may specify any other supplies that will be excluded from the application of UAE VAT.
    Article (15) – Registration Exceptions
    • Following the change, FTA permits current tax registrants to request an exception from VAT registration if their supplies are completely zero-rated.
    Article (21) – Cases of Tax Deregistration
    • FTA reserves the right to cancel the VAT Registration of any Tax Registrant if the continuance of such registration prejudices the integrity of the tax system.
    • Additionally, even after deregistration has been granted, the amendment permits the authority the power to collect any unpaid taxes or penalties.
    Article (26) – Date of Supply in Special Cases
    • The determination of the date of supply in case of the contract with periodic payments or consecutive invoices has specifically included in clause 1(d) i.e., the date of expiration of one year from the date the Goods or Services were provided.
    Article (27) –Place of Supply of Goods
    • The amendment states that the place of supply of goods involving export or import, will be in the UAE where the supply is a continuous supply that falls under the date of supply rules in Article 26(1) of the VAT Law and the ownership of goods is transferred in UAE.
    • This makes it clear that where the ownership of the goods is transferred in UAE, the VAT will still be applicable to the payments made when goods are physically kept outside UAE.
    Article (30) – 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.
    • Amendment to Article 30 (3) makes it clear that the special place of supply rule will be applicable only to services provided on goods (previously it was related to goods).
    Article (33) – The Agent
    • The place of residence of the principal shall be considered as the place of residence of the agent wherein it was previously mentioned as a place of residence of the agent shall be regarded as the place of residence of the principal for the respective cases mentioned in Article.
    Article (36) -Value of Supply for Related Parties
    • Article 37 is also considered in listing out the exceptions for the value of supply between related parties.
    • The amendment clarifies that where a deemed supply occurs between related parties, the value of supply should be determined by the market value subject to other conditions mentioned in the Article
    Article (45)-Supply of Goods and Services Subject to Zero Rate
    • Clauses (4),(5),(6),(12) and (14) of the Amendment of VAT Law have been extended to also include the importation of goods and/or services in addition to the supply of goods and/or services that shall be zero-rated.
    Article (48) – Reverse Charge
    • Clause 3 of Article 48 is revised, and the domestic reverse charge will apply only to Pure Hydrocarbons. This means RCM will be applicable to those hydrocarbons consisting solely of elements Carbon ( C ) & Hydrogen (H).
    • Procurement of any crude or refined oil, unprocessed or processed natural gas or Pure Hydrocarbons for the purpose of use for the production or distribution of any form of energy will also trigger the implication of domestic reverse charge mechanism.
    • Clause 8 is added whereby it is clarified that the Cabinet may issue a decision specifying other goods & services that are subject to reverse charge & specify the relevant conditions and provisions.
    Article (55) – Recovery of Recoverable Input Tax in the Tax Period
    • Clause 1 (a) is expanded to include the requirements to keep invoices and import documentation in relation to imported goods and services.
    Article (57) – Recovery of Tax by Government Entities and Charities
    • Government entities & Charitable institutions can recover the input VAT incurred against the provision of sovereign and relevant charitable activities respectively subject to normal input VAT recovery rules listed in the Law.
    Article (61) – Instances and Conditions for Output Tax Adjustments
    • Clause 1 (e) is expanded whereby a tax registrant can adjust the output tax where the previously applied tax treatment was in error.
    Article (62) – Mechanism for Output Tax Adjustment
    • A Tax Credit Note should be issued within 14 days from the date in which the output tax adjustment is required as listed out in clause 1 of Article 61 of the VAT Decree Law.
    Article (65) – Conditions and Requirements for Issuing Tax Invoices
    • As per the Amended VAT Law, not only when a person receives the VAT amount, but also when it issues a tax invoice, it must pay such VAT amount to the FTA as the Tax Due amount.
    Article (67) – Date of Issuance of Tax Invoice
    • The amended article mandates the issuance of tax invoices within 14 days from the date of supply for continuous supply as well.

     

    Note: Other Amended Articles exist but aren’t included in the list above because they, in our judgment, only include minor changes.

    Addition of New Article 79 bis – Statute of Limitations

    1. Except in cases under Clauses 2, 3, 6, and 7 of this Article, the Authority may not conduct a Tax Audit or issue a Tax Assessment to the Taxable Person after the expiration of 5 years from the end of the relevant Tax Period.
    2. The Authority may conduct a Tax Audit or issue a Tax Assessment to the Taxable Person after 5 years from the end of the relevant Tax Period, if he has been notified of the commencement of such Tax Audit’s procedures before the expiration of the 5-year period, provided that the Tax Audit is completed or the Tax Assessment is issued, as the case may be, within 4 years from the date of notification of the Tax Audit.
    3. The Authority may conduct a Tax Audit or issue a Tax Assessment after the expiration of 5 years from the end of the relevant Tax Period if such Tax Audit or Tax Assessment issuance relates to a Voluntary Disclosure submitted in the fifth year from the end of the Tax Period, provided that the Tax Audit is completed or the Tax Assessment is issued, as the case may be, within one year from the date of submission of the Voluntary Disclosure.
    4. The Cabinet may, according to a suggestion by the Minister, issue a Decision to amend the period specified for the completion of the Tax Audit or the issuance of the Tax Assessment as per Clauses 2 or 3 of this Article.
    5. No voluntary disclosure may be submitted after the expiration of 5 years from the end of the relevant Tax Period.
    6. In the case of Tax Evasion, the Authority may conduct a Tax Audit or issue a Tax Assessment within 15 years from the end of the Tax Period in which the Tax Evasion occurred.
    7. In case of Tax Registration failure, the Authority may conduct a Tax Audit or issue a Tax Assessment within 15 years from the date on which the Taxable Person should have registered for Tax.
    8. The statute of limitation set forth in this Article shall be interrupted for any of the reasons provided for in the Federal Law No. 5 of 1985, promulgating the Civil Transactions Law, or any other Federal law replacing it.

    How HLB HAMT can help?

    Our tech-driven professionals ensure that we make use of the latest technologies to provide accurate and effective results to clients. Moreover, we are first among the few registered tax agents at Federal Tax Authority enabling us to provide the best in quality services.

    Any questions or queries on this, please revert to tax@hlbhamt.com

     

     

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