Tax laws will continue to evolve and change. Always there will be tax updates and amendments. This is the nature of tax systems. As a business owner, it is your responsibility to ensure that you keep pacewith any tax updates and changes that could impact your business. We cannot emphasize enough that it is the business owner’s responsibility to ensure they follow all tax laws and regulations. Ignorance of the law does not excuse the business owner from their responsibility to be compliant. Noncompliance means penalties.
Effective January 1st, 2023, new VAT amendments will take effect. UAE Federal Tax Authority (FTA) has published amendments to the Federal VAT Decree-Law No. 8 of 2017 (UAE VAT Law).
The VAT new amendments range from registration to audit. This includes but is not limited to:
- Registration Exceptions:It is allowed for registered taxable persons to apply for registration exceptions (because of making only zero-rated supplies), unlike in the current version of VAT Law, where taxable persons could only apply for such exceptions at the time of registration.
- Place of Supply of Goods:Should be considered as in the UAE, where the transfer of title takes place in the UAE, that includes import or export.
- Place of Residence of a Principal:Place of residence of the agent shall be the place of residence of the principal.
- Recovery of Input Tax: The recoverable input tax can only be deducted if a proper tax invoice is received and pays the consideration or any part thereof. If the taxable person entitled to recover the Input Tax fails to do so during the Tax Period, he may include the recoverable Input Tax in the Tax Return for the subsequent Tax Period.
- Reverse Charge Mechanism: RCM will apply only to Pure Hydrocarbons, which are defined as any kind of different pure combinations of a chemical equation made only of hydrogen and carbon.
- Tax Invoices and Tax Credit Notes:Invoices must be issued within 14 days from the date of supply. Credit notes are to be issued within 14 days from the date in which an event took place that calls out to issue a tax credit note.
- Receiving VAT: Any person receiving an amount as tax or issuing a tax invoice in respect of an amount must pay such amount to the FTA.
- Deemed Supply:The value of deemed supply to a related party should be equal to the market value (not the total cost incurred).
- Record-keeping:A foreign supplier’s invoice must be received and booked before recovering VAT on import. If these documents are not available, businesses will not be able to claim input tax, but they will be liable to pay output tax on behalf of non-resident suppliers under the reverse charge mechanism.
- Voluntary disclosure: VD cannot be filed by the taxable person after five years from the end of the relevant tax period.
- Audit: Extension of audit timeline up to 9 (nine) years. The statute of limitation of five years will not apply to cases where the FTA has issued a notice to audit the taxable person, provided such an audit is completed within four years from the date of issuance of the notice. Furthermore, the amendments allow the FTA an additional year to undertake an audit if a voluntary disclosure (VD) is filed by the taxpayer during the fifth year from the end of the relevant tax period.
WHAT SHOULD YOU DO FOR YOUR BUSINESS TO ENSURE COMPLIANCE?
Business owners should be proactive tax planners andconsider appropriate tax approaches for each tax year.Businesses should review the Amended Decree Law to determine the effect of the updates on their business operations. Businesses need to conduct tax health checksand/or self-audit their tax system,historical tax data, VAT returns,records, etc. For any misapplication or deviation noted during the review process, a voluntary disclosure must be filed with FTA.
How can Think Biz help?
Our tech-driven professionals assure that we make use of the latest modern technologies to provide error-free results to clients. Moreover, we are specialized in the delivery of world-class professional services in Financial Management Services and complete VAT Related services involving VAT registration, VAT Implementation, accounting, Tax consulting, and compliance-related services. Our team of qualified TAX Agents Consultants and advisors has the expertise and dedication to ensure you receive the right advice to help you comply with ever-increasing tax laws and regulations in UAE.
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Written By: Yaser Darwish
USA Certified Accountant (CPA)
UAE Courts Accounting Expert
