Recent Amendment to UAE VAT Executive Regulation of Federal Decree-Law No. 8 of 2017 on VAT under Cabinet Decision 100 of 2024.
The UAE has recently introduced amendments to its VAT Executive Regulation through Cabinet Decision No. 100 of 2024. While most changes will come into effect from 15 November 2024, some will apply retrospectively. Businesses must review their VAT obligations to stay compliant with the updated regulations.
The following is the extract of some of the important amendments:
Article (1) – Definitions
A new definition for “Virtual Assets” and “Business Day” has been added.
Definition:
1. Virtual Assets
Digital representation of value that can be digitally traded or converted and can be used for investment purposes, and does not include digital representations of fiat currencies or financial securities.
2. Business Day
Any day of the week, except weekends and official holidays of the Federal Government.
Article (2) – Supply of goods
The scope for supplies of real estate has been extended. As per Article 2 (4): The following shall be considered a supply of Goods:
A supply of real estate including the lease, sale, and any other forms of disposal causing the transfer of ownership thereof from one person to another.
Effective from November 15, 2024
Article 3 (bis) – Exceptions of supplies (New article added)
a. The grant or transfer of ownership or disposal of government buildings, real estate assets, and other projects of a similar nature from a Government Entity to another Government Entity.
b. The grant or transfer of the right to use, exploit, or utilize the government buildings, real estate assets, and other projects. projects of a similar nature from a Government Entity to another Government Entity, including any granted or transferred right of use, exploitation or utilization as of 1 January 2023.
2. For the purposes of Clause 1 of this Article, Government buildings, real estate assets and other projects of similar nature shall mean the following: a. Government Entities’ premises.
b. Government capital projects.
c. Government infrastructural projects.
d. Real estate assets utilized and used by Government Entities.
e. Real estate assets allocated and utilized to serve a public utility and for public use.
f. Developed Government land.
Transfers of real estate and related assets between government entities are excluded from VAT (Out-of-scope supplies) retrospectively from January 1, 2023.
Article 5 – Exceptions related to deemed supply
For the purposes of Clause 4 of Article 12 of the Decree-Law, the value of the supply of Goods for each recipient, within a 12-month period, shall not exceed AED 500 (five hundred dirhams). The condition of “supply made is to be used as samples or commercial gifts” has been removed now.
For the purposes of Clause 5 of Article 12 of the Decree-Law, the total of Output Tax payable on all Deemed Supplies shall not exceed the following:
a. An amount of AED 2,000 (two thousand dirhams) for each supplier, within a 12-month period, and any amount exceeding this threshold shall be considered Payable Tax.
b. An amount of AED 250,000 (two hundred fifty thousand dirhams) for each supplier that is a Government Entity or a Charity in case the recipient is a Government Entity or a Charity, within a 12 month period, and any amount exceeding this threshold shall be considered Payable Tax.
Effective from November 15, 2024
Article 8 – Voluntary registration
Person may not register for Tax voluntarily unless he proves to the Authority that:
a. he is carrying on a Business in the State, and
b. he has the intention to make any of the supplies specified in paragraphs (a), (b) or (c) of Clause 1 of Article 54 of the VAT Federal Decree-Law No. 8 of 2017 and its amendments, as follows:
• Taxable supplies
• Supplies made outside the UAE which would have been taxable supplies had they been made in the UAE.
• Supplies made outside the UAE, which would have been treated as exempt had they been made inside the UAE.
Effective from November 15, 2024
Article 14 – Tax Deregistration
5. Where a Registrant applies for Tax deregistration due to the Taxable Supplies falling below the Mandatory Registration Threshold, the Authority shall, after approving the application, deregister with effect from: a. the date requested by the Registrant in the application,
b. the date on which the application is submitted if the Registrant did not indicate the preferred Tax deregistration date, or
c. any other date specified by the Authority.
Clause 9 has been added:
9. The Tax deregistration shall not absolve a Person from having to comply with the provisions of the Decree-Law and this Decision, including filing another Tax Registration application when the Tax Registration requirements are met.
Effective from November 15, 2024
Article (14) (bis) –Tax deregistration to protect the integrity of the tax system
1. The Authority may issue a decision to deregister a Person for Tax if the Authority determines that maintaining such Tax Registration may prejudice the integrity of the Tax system, provided that any of the following conditions is met:
a. the Registrant no longer meets the Tax Registration requirements according to the provisions of the Decree Law,
b. the Registrant has not submitted an application for Tax deregistration to the Authority as specified under Clause 1 of Article 21 of the Decree-Law, or the Registrant has initiated a Tax deregistration application with the Authority but has not completed such application,
c. any other conditions specified by the Authority.
2. The Authority shall verify that the Person is not eligible for Tax Registration before deregistering him.
3. Tax deregistration initiated by the Authority shall not absolve a Person from having to comply with the provisions of the Decree-Law and this Decision, including filing another Tax Registration application when the Tax Registration requirements are met.
Effective from November 15, 2024
Article (15) – Deregistration of a tax group or amendment thereof
It has been clarified that a member of a VAT group should be removed from the VAT group where, in addition to the cases mentioned in the same Article, the member is no longer making taxable supplies.
Effective from November 15, 2024
Article 29- Accounting for tax under Profit Margin
The profit margin is the difference between the purchase price of the Goods and the selling price of the Goods, and the profit margin shall be considered to be inclusive of Tax. The “purchase price” stated in Clause 4 of this Article includes, in addition to the price of the Good, any costs and fees incurred to purchase the Good.
In addition to the purchase price of the good, now we can deduct any costs and fees incurred to purchase the good.
Effective from November 15, 2024
Article 30 – Zero-rating the export of goods
The Direct Export shall be subject to the zero rate if the following two conditions are met:
a. The Goods are physically exported to a place outside the Implementing States or are put into a customs suspension regime in accordance with the GCC Common Customs Law within 90 (ninety) days of the date of the supply.
b. The exporter retains any of the following:
1) a customs declaration, and Commercial Evidence that proves the Export,
2) a Shipping Certificate and Official Evidence that proves the Export, or
3) a customs declaration that proves the suspension Effective from arrangement of customs duties, in case the Goods are put into customs suspension.
“Official Evidence” means the export certificate issued by the customs departments in the State or a clearance certificate issued by these departments or the competent authorities in the State
“Commercial Evidence” means the document issued by sea, air or land transport companies and agents, which proves the transfer and departure of the Goods from the State to outside the State, and includes any of the following documents:
1) Air waybill or air manifest.
2) Sea waybill or sea manifest.
3) Land waybill, or land manifest.
“Shipping Certificate” means a certificate issued by sea, air or land transport companies and agents as an equivalent of a commercial evidence where it is not available.
November 15, 2024
Article 31 – Zero-rating the Export of Services
New condition to Clause 1(a)3 has been added Condition 3. The Services are not treated as being performed in the State or in a Designated Zone under Clauses 3 to 8 of Article 30 and Article 31 of the Decree-Law. (Special place of supply rules).
Effective from November 15, 2024
Article (33) – Zero rating international transportation services for passengers and goods
Article 33 (1)
d. Transporting Goods from a place in the State to another place in the State if the Services are supplied by the same supplier as part of the supply of Services of transporting these Goods either from a place in the State to a place outside the State or from a place outside the State to a place in the State.
Effective from November 15, 2024
Article (42) – Tax Treatment of Financial Services
Article 42 (3)
The following financial services shall be exempted:
d. Fund management services described in paragraph (j) of Clause 2 of Article 42
e. Services specified in paragraphs (k) and (l) of Clause 2 of Article 42, including services supplied on or after 1 January 2018
j. The management of investment funds, which means “services provided by the fund manager independently for a consideration, to funds licensed by a competent authority in the State, including but not limited to, management of the fund’s operations, management of investments for or on behalf of the fund, monitoring and improvement of the fund’s performance”.
k. The transfer of ownership of Virtual Assets, including virtual currencies.
l. The conversion of Virtual Assets.
m. Keeping and managing Virtual Assets and enabling control thereof.
n. Agreeing to do or arranging any of the activities specified in paragraphs (a) to (m) of this Clause, other than advising thereon.
New services have been added to the scope of financial services where such services should be exempted from VAT
Effective from January 01, 2018
Article 46 – Tax on Supplies of More Than One Component
Clause 1 (b)
If a single composite supply does not contain a principal component, the Tax treatment shall, generally, be applied based on the nature of the supply as a whole.
Effective from November 15, 2024
Article (52) – Input tax recovery in respect of exempt supplies
1. Supplies referred to in paragraph (c) of Clause 1 of Article 54 of the Decree-Law are the supplies of Financial Services, where the place of supply of these Services is treated as outside the State and the Recipient of Services is outside the State at the time when the Services are performed.
2. For the purpose of Clause 1 of this Article a Person is “outside the State” even if they are present in the State, provided it is only a short-term presence in the State of less than a month, and that his presence is not effectively connected with the supply.
Effective from November 15, 2024
Article 53 – Nonrecoverable Input Tax
Input Tax shall be recoverable if it is incurred by a person where the Taxable Person provides health insurance, including enhanced health insurance, to its employees and their family members (as applicable) up to a husband or one wife, and three children younger than eighteen years.
Effective from November 15, 2024
Article 59 – Tax Invoices
Clause 13
Registrant shall issue the Tax Invoice within 14 (fourteen) days from the date of the supply provided for in Article 25 or 26 of the Decree-Law, except in the following cases:
1) where the Tax Invoice is issued in accordance with Clause 2 of Article 59, the Registrant shall issue the Tax Invoice on the date of supply,
2) for the purposes of Clause 6 of Article 59, the Registrant shall issue a summary of the Tax Invoice and deliver it to the Recipient of Goods or Recipient of Services within 14 (fourteen) days of the end of the calendar month within which the date of supply occurs for such supplies.
Clause 14
Where the Authority grants approval under Clause 7 of this Article, such approval may be withdrawn at any time where the Authority considers that the conditions of approval are no longer met.
Clause 15
As an exception to Clause 5 of this Article, the Authority may specify the cases in which a Tax Invoice that meets the requirements of Clause 1 of this Article must be issued, even if one of the cases provided for in Clause 5 of this Article applies.
Effective from November 15, 2024
Article 60 – Tax Credit Note
Clause 1 (e)
In case more than one Tax Credit Note is issued in relation to the same Tax Invoice, the value of the supply shown on the Tax Invoice in the subsequent Tax Credit Note shall be the adjusted value based on the previous Tax Credit Note.
Clause 6
Where an agent who is a Registrant makes a supply of Goods and Services for and on behalf of the principal of that agent, that agent may issue a Tax Credit Note in relation to that supply as if that agent had made the supply, provided that the principal shall not issue a Tax Credit Note, subject to:
a. the agent retaining sufficient records in such a manner as to determine the name, address and Tax Registration Number of the principal supplier, and
b. the principal supplier retaining sufficient records in such a manner as to determine the name, address and Tax Registration Number of the agent.
Effective from November 15, 2024
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