Vat Regulations in the UAE : Key Changes and Compliance Requirements 2023
Vat Regulations in the UAE : The UAE Federal Government recently enacted Federal Decree Law No. 18 of 2022, effective from 01 Jan 2023, to amend provisions in Federal Decree Law No. 8 of 2017. This law amends 25 existing articles and introduces a new article concerning the “Statute of Limitation.”
This article highlights essential changes and compliance obligations in VAT that businesses must be informed about.
Key Changes introduced by the Federal Decree Law No 18
1. Exception from VAT Registration
Under the new law, registered individuals making taxable supplies can seek an exception from VAT registration if all their supplies are zero-rated or if they no longer make any supplies other than zero-rated ones. This is a significant change from the previous rule, which granted exceptions only to unregistered individuals exclusively making zero-rated supplies.
2. Date of Supply in Special Cases
The new VAT regulations in the UAE state that in special cases, the date of supply will be determined based on the passage of one year from the date of providing goods or services. If a taxable person supplies goods or services without receiving payment or issuing a tax invoice within one year from the date on which goods or services were provided, the date of supply will be considered as the end of that one-year period.
3. Place of Supply in Special Cases
Under the new law, the place of supply for transport-related services is determined by the place where the transport originates, as opposed to the previous rule which considered the place where the services were performed.
4. Place of residence of a principal
Under the amended law, the place of residence of a principal is now determined by the place of residence of the agent, reversing the previous VAT law provision.
5. Goods subject to Zero-rate
The new lists additional goods as subject to zero-rate of VAT. This includes but not limited to the following:
o Import of means of transportation;
o Import of goods related to means of transportation; and
o Import of rescue planes and ships.
o The import of crude oil and natural gas.
o The supply of goods or services related to the provision of preventive and basic healthcare.
6. Deregistration initiated by the FTA
Starting from 01 Jan 2023, the Federal Tax Authority (FTA) holds the authority to initiate tax deregistration procedures, which was previously only possible upon the registrant’s request. The specific controls and conditions will be outlined in the Executive Regulations.
7. Statute of Limitation
The new law inserts a new article on “Statute of Limitation” which states that any tax claim shall lapse after 5 years from its due date unless there is an ongoing dispute or investigation.
This article sets a time limit for the FTA and the taxpayers to raise tax audits, assessments, refunds, or penalties. However, the article also allows the FTA to extend the time limit in certain cases, such as when they notify the taxpayer of an audit before the end of the five-year period, or when there is a case of tax evasion or non-registration.
For example, if a taxpayer makes a mistake in their VAT return for the quarter ending March 31, 2023, they have until March 31, 2028 to correct it by submitting a voluntary disclosure or requesting a refund. However, if the FTA notifies them of an audit on March 30, 2028, they can extend the time limit by four years and conduct the audit or issue an assessment until March 30, 2032. Similarly, if a taxpayer fails to register for VAT or evades tax, the FTA has 15 years from the due date of the tax to conduct an audit or issue an assessment.
How RVG Can Help?
To ensure full compliance with the changes introduced by Decree Law No. 18, it is advisable to seek the assistance of VAT professionals. RVG Chartered Accountants offers expert guidance in navigating UAE VAT laws, VAT regulations in the UAE ensuring compliance and avoiding potential pitfalls.
