UAE VAT Law Amendment Effective from 01.01.2023

Amended Article

HLB Comments

• 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.

• 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 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.

• Following the change, FTA permits current tax registrants to request an exception from VAT registration if their supplies are completely zero-rated.

• 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.

• 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.

• 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(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).

• 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 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

• 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.

• 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.

• Clause 1 (a) is expanded to include the requirements to keep invoices and import documentation in relation to imported goods and services.

• 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.

• Clause 1 (e) is expanded whereby a tax registrant can adjust the output tax where the previously applied tax treatment was in error.

• 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.

• 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.

• The amended article mandates the issuance of tax invoices within 14 days from the date of supply for continuous supply as well.