VAT Update Alert! Amendments On Executive Regulations Effective From 15th November 2024
On 2 October 2024, The UAE Federal Tax Authority released amendments to VAT Executive Regulations of Federal Decree-Law No. 8 of 2017 by publishing Cabinet Decision No. 100 of 2024. These amendments will be effective from 15 November 2024.
Businesses in the UAE need to be prepared for these changes and take necessary steps to comply with the regulations. These updated VAT ER regulation amendments bring significant implications to businesses across many industries particularly to the real-estate and financial sector.
Article 1
Definitions
The definitions of Business Day and Virtual Assets have been added. Business Day will be any day of the week except weekends and official federal government holidays.
Virtual assets are referred to as digital value which can be traded or transferred digitally or can be used for investment purposes. Digital representations of paper currencies or securities will not be considered as digital assets.
Article 2
Extended Scope of Supply Of Goods in Real Estate
The scope of supply of goods for real estate have been widened to include any disposal of goods that result in transfer of ownership between two persons, besides the sale and lease of real estate.
Article 3 (bis)
Exceptions Of Supplies
A new article has been included related to the exception of the supply of services. According to the article, the following scenarios will not be considered a supply.
The granting or transferring the right to own, use or disposal of governmental buildings, real estate properties and projects from one government entity to another government entity.
The Article 1 defines the following as Government buildings, real estate assets and other projects of a similar nature:
- Government Entities’ premises.
- Government Capital Projects.
- Government Infrastructure Projects
- Real Estate Assets Utilized and Used by Government Entities
- Real Estate Assets Allocated and Utilized for Public Use and to Serve a Public Utility
- Developed Government land.
Article 5
Exceptions Related To Deemed Supply
The output tax threshold for the exemption from deemed supplies has been included:
The output tax for deemed supplies where the supplier is a government body or charity and the recipient is a government body or charity, the threshold for each person will be up to AED 250,000 in 12 months. The exceeding amount will be considered as payable tax.
Article 8
Voluntary Registration
The person who voluntarily registers for VAT must satisfy the below conditions:
The Person is carrying out business in the UAE.
The supplies carried out in the UAE and outside the UAE will be considered taxable. (Refer to paragraphs (a) (b) or (c) of Clause 1 of Article 54 of the Decree-Law)
Article 14 (bis)
Tax Deregistration To Protect The Integrity of the Tax System
A new article has been added that the authority has the right to issue tax deregistration decisions for taxable persons if maintaining the tax registration of taxable persons may prejudice the integrity of the tax system.
Article 15
Deregistration of a Tax Group
This amendment clarifies that the member of the VAT Group should be removed (including other cases mentioned in the article) if the member does not make any taxable supplies for a longer time.
Article 29
Accounting for Tax on the Profit Margin
For the purpose of profit margin calculation, the purchase price will be calculated in addition to the price of the goods and any other fee incurred for purchasing the goods.
Article 30
Zero Rating The Export of Goods
In order to avail the Zero Rating Benefits for the export of goods, this article clarifies the maintenance of export documentation. The definition of “official evidence”, “commercial evidence” and “shipping certification” has been provided.
Official evidence is defined as:
- Export certificates issued by UAE customs authorities
- Clearance certificate issued by customs authorities or any other competent authorities after verifying that the goods have left the country
- Document or clearance certificate certified by competent authorities from the country of destination after confirming the arrival of goods.
Commercial Evidence is defined as a document issued by the transportation agencies to confirm that the particular goods have been transported and moved outside the country. The documents can be:
- Air waybill or air manifest.
- Sea waybill or sea manifest.
- Land waybill, or land manifest.
A shipping certificate is defined as a certificate issued by transportation agencies, which is treated as equivalent to commercial evidence in cases where it is not available.
Article 31
Zero Rating The Export of Services
A new condition has been included for zero-rating eligibility for services. The following services are not eligible for zero-rating
- Restaurant
- Hotel
- Catering
- Cultural
- Artistic
- Sporting Events
- Transportation
- Telecommunication
- Any services handling movable assets in UAE
Article 33
Zero Rating International Transportation Services For Passengers And Goods
Transportation of goods within UAE will be eligible for Zero-rating if the suppliers are the same who handle international transportation.
Article 34
Zero Rating Certain Means Of Transport
The zero-rating benefit will be considered for the import of means of transport as well.
Article 35
Zero-rating Goods and Services in Connection with Means of Transport
Additional conditions have been included for services supplied directly in connection with transportation services, especially for operating, repairing, maintaining or converting.
Article 37
Residential Buildings
The definition of Residential Building does not include hotel apartments and similar properties.
Article 41
Zero-rating Healthcare Services
The zero-rating benefit has now encompassed the import of pharmaceutical products & equipment.
Article 42
Tax Treatment of Financial Services
Some of the financial services will be exempted from VAT
- The management of investment funds, the services offered by the fund manager independently, to funds licensed by the competent authority will be exempted from VAT.
- Ownership transfer of virtual assets not limited to virtual currencies (cryptocurrency), and the conversion of virtual assets.
- Maintaining virtual assets and enabling control from them.
Article 46
Tax on Supplies of More Than One Component
A new rule has been added where a single composite supply will be assessed, without including the principal component, based on the nature of the whole supply in all its components for the VAT treatment.
Article 52
Input Tax Recovery in Respect of Exempt Supplies
Certain conditions for input recovery purposes have been included for financial services provided outside the UAE where the person is present in the UAE.
The person will be considered outside the UAE if
- The person stays for a short time less than 1 month
- Their presence in UAE is not related to the supply
Article 53
Nonrecoverable input tax
Employee-related expenses have been updated in the exemption list for Input VAT entitlement:
Medical insurance offered for employees and their family members will be exempted, in consideration of the legal obligations of labor law of the respective zone.
Article 55
Apportionment of input tax
The following provisions have been updated:
- For the purpose of input tax appointment, Input VAT recovery can be processed fully if the taxable person is a government entity or a charity.
- Businesses are permitted to apply for a particular percentage for Input VAT recovery depending on their previous tax year’s VAT input recovery percentage.
Article 58
Adjustment to Capital Asset
The first year in which the capital asset is generated internally is the year in which the asset begins to be used.
Article 59
Tax invoices
The FTA has included a few conditions for the issuance of tax invoices:
Simplified tax invoices are restricted for supplies that are taxable under the Reverse Charge Mechanism.
The issuance of Simplified tax invoices must be processed on the date of supply.
The summary tax invoices should be issued at the end of the same calendar month as the date of supply is removed.
Article 60
Tax Credit Notes
If more than one credit note is issued for the same tax invoice by a registrant, the supply in the subsequent tax credit note should be the value adjusted from the previous credit note.
Moreover the issuing agent of the tax credit note on behalf of the principal, must satisfy these conditions:
The agent must maintain the records to identify the name, address and TRN of the principal supplier.
The supplier must retain relevant records to determine the name, address and TRN of the tax credit note issuing agent.
Article 68
Tourist Visitor
The period of export of goods to a foreign country by the overseas tourist within 90 days from the date of supply.
Article 69
Foreign Government
Refund claims by foreign governments must be submitted within 36 months from the date of tax incurred or any other timeline mentioned under the provisions of the international treaty or other agreement force in the country.
Impacts of the Amendments for Businesses & The Next Steps
These VAT ER amendments will create a significant impact on businesses from all industries, effective from 15th November 2024. It is crucial for taxable persons to stay updated with the amendments and evaluate the implications on their business.
To stay compliant with VAT regulations, you can reach out to tax consultants like KGRN Chartered Accountants to help you assess the current tax position, get advice on tax preparation and treatment and guide you throughout the process. Get in touch with our expert tax professionals of KGRN!
