08 Dec New Amendments to UAE Federal Decree-Law No. 18 of 2022 – Issued 26 Sep 2022 (Effective from 1 Jan 2023)
New Amendments to UAE Federal Decree-Law No. 18 of 2022 – Issued 26 Sep 2022 (Effective from 1 Jan 2023)
The UAE has introduced the Federal Decree-Law No.18 2022 amending some provisions of the Federal Decree-Law No. 8 2017 on Value Added Tax (the VAT Law) effective from 1st January 2023. In addition to other key amendments, a new article on the statute of limitation has been added to the UAE VAT Law.
Article 79 (bis) New Article on Statute of Limitations
New Article 79 (bis) has been inserted to the UAE VAT Law. As per the new article, the statute of limitation of five years is not relevant if Federal Tax Authority has issued an audit notice to audit the taxable person, before expiry of 5 years from end of the relevant tax period provided such an audit is completed within four years from the date of issuance of the notice.
In case taxable person files, a voluntary disclosure 5th year from the end of the relevant tax period, the FTA can complete the audit or issue a tax assessment within 1 year from date of submission of the voluntary disclosure
No voluntary disclosure may be submitted after the expiration of 5 years from the end of the relevant Tax Period.
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.
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.
The Cabinet will have powers to amend periods specified in the exceptions to the statute of limitation. In all cases, limitation will be interrupted where reasons stipulated in the Civil Transactions Law or any other Federal law replacing it.
New Definitions
New definitions have been inserted for Relevant Charitable Activity, Pure Hydrocarbons, Tax Evasion, Tax Audit, Tax Assessment and Voluntary Disclosure.
Article 15 – Exception from VAT Registration in the UAE
Article 15 of the UAE VAT Law states that:
- “The Authority may except a Taxable Person from Tax Registration whether a Registrant or not, upon his request if his supplies are only subject to the zero rate”.
- Where any changes in the Business of the Taxable Person excepted from Tax Registration according to Clause 1 of this Article, result or may result in the absence of the reason based on which the Taxable Person was excepted, the Taxable Person shall inform the Authority of such changes within the time limits and pursuant to the procedures determined by the Executive Regulation of this Decree-Law.
Article 26 Date of Supply in Special Cases
- The date of supply of Goods or Services for any contract that includes periodic payments or consecutive invoices shall be the earliest of any of the following dates:
- The date of issuance of any Tax Invoice
- The date payment is due as specified on the Tax Invoice
- The date of receipt of payment
- The date of expiration of one year from the date the Goods or Services were provided”
Article 30 – Place of Supply in Special Cases
Article 30 clause 8 states that:
For the supply of transportation Services or Transport-related Services, the place of supply shall be where the transportation starts. The Executive Regulation of this Decree-Law shall specify the place of supply for transportation Services and Transport-related Services if the trip includes more than one stop.
Article 33 – Agent
Article 33 of the amended UAE VAT Decree-Law defines the place of residence of a principal as the place of residence of the agent. In the current VAT Law, Article 33 states that the place of residence of the agent shall be the place of residence of the principal in the following two cases:
- If the agent regularly exercises the right of negotiation and enters into agreements in favor of the principal.
- If the agent maintains a stock of Goods to fulfil supply agreements for the principal regularly.”
Article 36 – Value of Supply and Deemed Supply for Related Parties
Article 36 for the value of supply or import of goods and services between related parties will now override Article 37 (value of deemed supply).
As per Article 36 The value of the supply or Import of Goods or Services between Related Parties shall be considered equal to the market value if all of the following conditions are met:
- The value of the supply is less than the market value
- If the supply is a Taxable Supply and the Recipient of Goods or Recipient of Services does not have the right to recover the full Tax that would have been charged on such supply as Input Tax
Article 45 – Goods and Services Subject to Zero Rate
Article 45 of the new UAE VAT Law has introduced additional goods that are subject to zero-rate of VAT.
Clause 4 of Article 45: Supply or Import of air, sea and land means of transport for the transportation of passengers and Goods as per the criteria and conditions specified in the Executive Regulation of this Decree-Law.
Clause 5 of Article 45: Supply of Goods or Services, or Import of Concerned Goods, related to the supply of the means of transport mentioned in Clause 4 of this Article and which are designated for the operation, repair, maintenance or conversion of these means of transport.
Clause 6 of Article 45: Supply or Import of air or sea rescue and assistance aircraft or vessels.
Article 48 – Reverse Charge Mechanism
Clause 3 of Article 48 states that the domestic reverse charge will apply to Pure Hydrocarbons.
Article 55 – Recovery of Input VAT
Article 55 of the VAT Law amended and Conditions for documentary evidence for input VAT recovery on import of goods and services have been added. Clause 1 (a) has been amended
- If any of the following cases has occurred:
1) The Taxable Person receives and retains the Tax Invoice as per the provisions of this Decree-Law, provided that the Tax Invoice includes the details of the supply related to such Input Tax or keeps any other document pursuant to Clause 3 of Article 65 of this Decree-Law in relation to the Supply on which Input Tax was paid.
2) The Taxable Person imports the Goods and receives and retains invoices and Import documents in accordance with the provisions of this Decree-Law and its Executive Regulation in relation to the Import on which Input Tax was paid or declared.
3) The Taxable Person imports the Services and receives and retains invoices in accordance with the provisions of this Decree-Law and its Executive Regulation in relation to the Import on which Input Tax was declared.
Article 57 – Recovery of Input VAT by Government Entities and Charities
The new UAE VAT Law states that government entities can recover input VAT incurred for the provision of sovereign activities. Charitable organizations can also recover input VAT incurred for the provision of relevant charitable activities. As per Article 57:
- Without prejudice to the general provisions of Input Tax recovery, Government Entities and Charities entitled to recover the full amount of Input Tax shall be determined in a Cabinet Decision issued upon the recommendation of the Minister, according to the following:
- Input Tax paid by the Government Entity for the purposes of its Sovereign Activities.
- Input Tax paid by the Charity for the purposes of its Relevant Charitable Activity.”
Article 61 (1e) Output VAT Adjustment
Output VAT can be adjusted if the If the Tax was charged or Tax treatment was applied in error.
Article 62 – Mechanism for Output Tax Adjustment
If the Output Tax calculated by the Registrant exceeds the Output Tax which should have been charged on the supply, the Registrant shall issue a Tax Credit Note according to the provisions of this Decree-Law within 14 days from the date in which any of the situations provided for in Clause 1 of Article 61 of this Decree-Law took place.
For detail, please refer to the Federal Decree-Law No. 18 of 2022 – Issued 26 Sep 2022 (Effective from 1 Jan 2023) DOWNLOAD PDF
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