Federal Decree-Law No. 18 of 2022 – Issued 26 Sep 2022 (Effective from 1 Jan 2023)
January 1, 2023, will mark a significant date for the UAE’s Value-Added Tax (VAT). During this time, the country will have completed five years under its tax regime, and the first major changes to VAT laws will take effect.
Listed below are the changes that all business owners should be aware of:
Article 1 – Definitions
New definitions are added for Relevant Charitable Activity, Pure Hydrocarbons, Tax Evasion, Tax Audit, Tax Assessment, and Voluntary Disclosure.
Article 5 – Supply of Goods
Entry into a contract between two or more parties entailing the transfer of Goods at a later time, under the conditions specified in the Executive Regulation of this Decree-Law.
Article 7 – Supply in Special Cases
As an exception to what is stated in Articles 5 and 6 of this Decree-Law, any other supply specified in the Executive Regulation of this Decree-Law, shall not be considered a supply.
Article 15 – Registration Exception
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.
Article 21 – Tax Deregistration Cases
The Authority may, following the controls and conditions specified in the Executive Regulation of this Decree-Law, issue a Tax deregistration decision, if the Authority finds that continuity of such Tax Registration may prejudice the integrity of the Tax system.
Article 26 – Date of Supply in Special Cases
The date of expiration of one year from the date the Goods or Services were provided.
Article 27 – Place of Supply of Goods
The place of supply of Goods that includes Export or Import shall be inside the state if Clause 1 of Article 26 of this Decree-Law applies, and the ownership of Goods is transferred in the State.
Article 30 – Place of Supply in Special Cases
For the supply of transportation Services or Transport-related Services, the place of supply shall be where the transportation starts.
Article 33 – The Agent
The Place of Residence of the principal shall be considered as being the Place of Residence of the agent.
Article 36 – Value of Supply and Deemed Supply for Related Parties
As an exception to Articles 34, 35, and 37 of this Decree-Law, the value of the supply or Import of Goods or Services between Related Parties shall be considered equal to the market value.
Article 45 – Goods and Services Subject to Zero Rate
- International transport of passengers and Goods which starts or ends in the State, or passes through its territory, including Transport-related Services.
- Supply or Import of air or sea rescue and assistance aircraft or vessels.
- The supply or Import of investment precious metals. The Executive Regulation of this Decree-Law shall specify the precious metals and the standards based on which they are classified as being for investment purposes.
- The supply or Import of crude oil and natural gas.
- The supply of preventive and basic healthcare Services and related Goods.
Article 48 – Reverse Charge
The reverse charge will apply to pure hydrocarbons instead of any form of hydrocarbons.
Article 55 – Recovery of Recoverable Input Tax in the Tax Period
The first condition in Article of Recovery of the input tax as per reverse charge mechanism is amended with the addition to keep the invoices and important documentation that is for goods only for the importation of goods and services.
Article 57 – Recovery of Tax by Government Entities and Charities
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 its Sovereign Activities.
- Input Tax paid by the Charity for its Relevant Charitable Activity.
Article 61 – Instances and Conditions for Output Tax Adjustments
A Registrant shall adjust Output Tax after the date of supply 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.
Article 65 – Conditions and Requirements for Issuing Tax Invoices
Any person receiving an amount as Tax or issuing a Tax Invoice in respect of an amount must pay such amount to the Authority, and this amount shall be regarded as being similar to Due Tax under the provisions of this Decree-Law.
Article 67 – Date of Issuance of Tax Invoice
The Registrant shall issue a Tax Invoice within 14 days from the date of supply as stated in Article 25 or Article 26 of this Decree-Law.
Article 79 (bis) – Statute of Limitation
Except in cases under Clauses 2, 3, 6, and 7 of this Article, the Authority may not conduct a Tax Audit or issue a Tax Assessment to the Taxable Person after the expiration of 5 years from the end of the relevant Tax Period.
The Authority may conduct a Tax Audit or issue a Tax Assessment to the Taxable Person after 5 years from the end of the relevant Tax Period if he has been notified of the commencement of such Tax Audit’s procedures before the expiration of the 5-year period, provided that the Tax Audit is completed or the Tax Assessment is issued, as the case may be, within 4 years from the date of notification of the Tax Audit.
The Authority may conduct a Tax Audit or issue a Tax Assessment after the expiration of 5 years from the end of the relevant Tax Period if such Tax Audit or Tax Assessment issuance relates to a Voluntary Disclosure submitted in the fifth year from the end of the Tax Period, provided that the Tax Audit is completed or the Tax Assessment is issued, as the case may be, within one year from the 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.
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