January 1, 2023, marks the completion of five years of Value Added Tax (VAT) in the UAE (first introduced in UAE on January 1, 2018). Over the years a lot of amendments were made to the VAT law with new additions of decrees and articles. Staying on top of the changes is essential to being a tax-compliant resident as well as avoiding fines or getting into trouble with the law of the land.

In this article, we run you through a list of UAE VAT law changes you must be aware of this year.

Extended timeline for tax audits

Generally, a tax audit for a monthly/quarterly tax period could not be carried out after the expiration of five years from the end of such a tax period. As per the new amendments, The FTA can undertake a tax audit, or issue a tax assessment more than five years after the end of a tax period, if they notify the taxpayer of a tax audit before the end of the five-year period, and either complete the audit or issue a tax assessment within four years from the date they notified the taxpayer of the tax audit. This provides the FTA with a lot more time to raise a tax audit.

Tax audit after voluntary disclosure

A new article, Statute of Limitations, has been added to the Amended Decree Law to allow the FTA an additional four years to undertake an audit providing that it has issued a notice for audit or assessment before the expiration of the general statute of limitations of five years. Further, the article allows the FTA an additional one 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.

Tax audit in case of tax evasions

In the event of tax evasion or tax registration failure, the authority may conduct a tax audit or issue a tax assessment within 15 years from the end of the tax period in which the tax evasion occurred or from the date on which the taxable person was required to perform tax registration.

Timeline to issue a tax invoice/credit note

The time limit for the issuance of a valid tax invoice of 14 days from the date of supply has been extended to supplies that include periodic payments or consecutive invoices. Previously, there was no such time limit for the issuance of a tax invoice in the UAE VAT Decree Law under these circumstances.

Also an article of the Amended Decree Law now introduces a time limit of 14 days for the issuance of a valid tax credit note. Previously, there was no such time limit for the issuance of a tax credit note.

VAT treatment of director’s services

The change in the new UAE VAT law entails that, as of 1 January 2023, the performance of a (UAE) director’s function, by a natural person and for a remuneration (monetary or in-kind), on a board of directors of any government or private sector entity, shall not be considered to be a supply of services for VAT purposes.

Goods subject to zero-rate

Additional goods have been listed in the amended UAE VAT Decree Law as subject to zero-rate of VAT. This includes the supply or import of air, sea and land means of transport for the transportation of passengers and goods. The supply or import of air or sea rescue and assistance aircraft or vessels are also included.

Reverse charge mechanism

In place of ‘any hydrocarbons’ the amendment clarifies that the reverse charge mechanism will only apply to ‘pure hydrocarbons’ as outlined in Article 48 (3). Pure hydrocarbons are various pure compounds of the chemical formula consisting solely of hydrogen & carbon (CxHy).

If you need any further clarification to ensure compliance in line with the new amendments, please feel free to get in touch with our VAT experts.