VAT Amendments in UAE

VAT Amendments

Oct 26, 2022

Amendments in UAE VAT Law

Introduction:

The UAE government made amendments to in VAT Law (Federal Decree Law no 8 of 2017) through the Federal Decree Law no 18 of 2022. Below educational summary is based on unofficial translation, this is not an advisory neither an opinion nor it represents the bare law.

VAT Consultants in Dubai and other emirates are key professionals experts who can help businesses to stream line their business tax affairs. Reach our to us or any of Accounting Firms in Dubai.

As a heads up, we would like to mention, UAE Corporate Tax is just around the corner, we suggest to consult a Tax Consultants in UAE to help you prepare an assessment of Tax Impact on business.

The Amendments:

1.    Statute of Limitation (SOL) introduced through article 79

A new article is inserted in the VAT law, called Statue of Limitation, as a general rule, FTA can not conduct tax audit or issuance an assessment after 5 years from the end of the relevant tax year.

Ø  Following are the exception of the rule:

·      If an audit notice has been issued before expiry of 5 years, the FTA can complete the audit or issuance an assessment within 4 years from the date of the notice.

·      If an audit relates to voluntary disclosure submitted in 5^th year, the FTA can complete the audit or issuance an assessment within 1 years from the date of the submission.

·      Where the case is of tax evasion the FTA has the authority to conduct audit or issue a tax assessment within 15 year from the end of the relevant tax period.

Ø  Voluntary disclosure cannot be filed after the expiry of the 5 year from the end of the relevant year.

Ø  The Cabinet has powers to amend the periods mentioned in the exception to the general rule, in addition to above, the cabinet have power to amend the periods in all case where a need arise due to the reason mentioned in the civil transactions law.

Key Note: FTA has powers to conduct audit or issue an assessment within 5 years of the end of relevant tax period, the said audit and assessment can be done even if the notice of the same was issued before the end of the 5 year period, in this case, FTA has to complete the audit/assessment within 4 years of such notice.

With this new provision the right to audit is now time bared however there is additional 4 years to complete the audit or assessment in cases where notice was served before expiry of 5 years which was not available earlier.

2.    Timeframe to raise invoices and issue credit note (Article 62 and 67)

Earlier there was a time frame for issuing invoicing for one off supply, however the amended law introduced a timeframe for continuous supplies also. Similarly, a tax credit note timeframe is included in amended law.

Ø  Invoices must be raised within 14 days for continuous supply from the date of supply rule under the article 26 of VAT law.

Ø  A tax credit note should be issued within 14 days of the adjustment event in certain specified cases.

3.    Hydrocarbons vs Pure Hydrocarbons (Article 48)

Hydrocarbon are under reverse charge mechanism for certain B2B supplies, however there was confusion on products with partial hydrocarbons in it, the lay now expressly included the word PURE with hydrocarbons. This means the reverse charge mechanism is now limited to Pure Hydrocar only.

Ø  The term Hydrocarbon has been replaced by Pure-Hydrocarbon.

Ø  Any product or chemical equation as a result of combination of Hydrogen or Carbon, this is new definition included in the law.

4.    Input VAT recovery on Imports of goods & services (Article 55)

Businesses used to report VAT on imports in Box 3 (RCM on output vat) and 6 (VAT on imports) and recover input VAT in box 10 without having sufficient documentation. It is now mandated to produce sufficient evidence to claim the input VAT.

Ø  Sufficient documentary evidence is required to recover input vat, this condition is included in the law.

Ø  Invoices or customs documents will be required to support input vat claims.

5.    Place of Supply Rule

i)              For Continuous and periodic supplies (Article 27-3-a-4)

A new provision has been added under atrial 27(3)(a) which says the place of supply of good involving imports or exports will be UAE if the supply is continuous supply which falls under the date of supply rule under article 26(1) and the ownership in the goods are transferred in the UAE.

ii)             For Supply to Transport related services (Article 30-8)

A new provision has been added to include the transport related services with the supply rule of transport itself. The place of such services is where the transport start. Prior to this amendment, only the transport services were mentioned under this article. This provision was there in the VAT Regulation already, however it now included in VAT Law.