FTA Publishes New Amendments to the UAE VAT Executive Regulations

08 Dec FTA Publishes New Amendments to the UAE VAT Executive Regulations

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FTA Publishes New Amendments to the UAE VAT Executive Regulations

Cabinet Decision No. 99 of 2022 – Issued 21 Oct 2022 (Effective from 1 Jan 2023)

The Federal Tax Authority (FTA) has published the UAE Cabinet of Ministers’ Decision No. 99 of 2022 amending the Executive Regulation of the Federal Decree-Law No. 8 of 2017 on Value Added Tax (“the UAE VAT Executive Regulations”). The Decision amends the VAT treatment of director’s services in the UAE along with record-keeping provisions for the e-commerce companies.

Article 3: Supply of Services

The Cabinet Decision No 99 of 2022 has added a new clause No 2 to Article 3 of the Executive Regulation of the Federal Decree-Law No. 8 of 2017 on Value Added Tax. As per this new clause “the functions of a member of a board of directors, performed by a natural person appointed as such, for any government entity or private sector establishment, shall not be considered a supply of Services.”

The amendment to Article 3 of the Executive Regulation of the Federal Decree-Law No. 8 of 2017 effectively removes the obligation for independent directors to apply for VAT registration in the UAE and charge VAT on their remunerations (Director fee). Similarly, there would be no obligation for the registrant in the UAE to account for VAT under the reverse charge mechanism when receiving directors’ services from non-resident directors.

Article 72 Clause 3 – Record Keeping of the Supplies Made

There is an amendment to Clause 3 of this article which adds more clarification regarding the record-keeping requirements. It says that if the Taxable Person who makes any Taxable Supply of Goods or Services does not have a Fixed Establishment in the State, the following shall apply:

1. If he has a Place of Establishment in the State, he must keep records of the transaction to prove the Emirate in which the Place of Establishment is located
2. In the event that he does not have a Place of Establishment in the State, he must keep records of the transaction to prove the Emirate in which the supply is received

Article 72 Clause 4 – Record Keeping of the Supplies Made

As an exception to Clause 3, Clause 4 states that if the value of the Taxable Supplies made by the Taxable Person through electronic commerce exceeded AED 100,000,000 during the calendar year, that person must keep records of the transaction to prove the Emirate in which the supply is received in the period specified in Clause 6 of this Article

Article 72 Clause 5 – Record Keeping of the Supplies Made

This clause gives more clarity to the term ‘electronic commerce for the purpose of Clause 4 of Article 72 of the Executive Regulation of the Federal Decree-Law No. 8 of 2017. It defines electronic commerce as the process of selling Goods or Services through electronic means, an electronic platform, a store in social media, or electronic applications in accordance with criteria and conditions determined by the Ministry of Finance.

Article 72 Clause 6– Record Keeping of the Supplies Made

For the purpose of implementing the provisions of Clause 4 of this Article, the provisions of Taxable Supplies via electronic commerce shall apply to a Taxable Person as follows:

1. From the first Tax Period that begins on or after 1 July 2023 for 18 months for the Taxable Person whose Taxable Supplies made via electronic commerce exceeded the threshold prescribed in Clause 4 of this Article during the calendar year ending 31 December 2022
2. For two years commencing from the first Tax Period of the calendar year that begins after the date on which the Taxable Supplies made by the Taxable Person through electronic commerce exceeded the threshold prescribed in Clause 4 of this Article

For detail, please refer to the Executive Regulation of Federal Decree Law No 8 of 2017 – Publish 17112022