November 2022 / United Arab Emirates

The Federal Tax Administration (FTA) has published a VAT Clarification concerning the main changes to the VAT Decree Law (Decree-Law). The principal amendments to the Decree-Law are as follows:

• new definitions (article 1);
• exception from registration for persons already registered for VAT (article 15);
• deregistration initiated by the FTA (article 21);
• place of supply of goods when the date of supply is determined under article 26(1) of the Decree-Law (article 27);
• clarifying the place of residence of the principal where its agent regularly negotiates and contracts in favour of the principal, or regularly maintains inventory of the principal to fulfil supply arrangements (article 33);
• value of supply and deemed supply between related parties (article 36);
• clarifying the period within which tax credit notes must be issued (article 62);
• clarifying the period within which tax invoices and tax credit notes must be issued (article 67); and
• statute of limitation (article 79 bis).

The amendments to the Decree-Law will come into force on 1 January 2023. The amendments were issued by Federal Decree No. 18 of 2022 on the amendment of certain provisions of Federal Decree No. 8 of 2017 on Value Added Tax.

The Federal Tax Authority (FTA) has published Federal Decree-Law (DL) No. 28 of 2022, concerning tax procedures. The DL abrogates Federal Decree No. 7 of 2017. The most important features of the law compared to the previous law are the following:

• Article 1 - Definition: The DL has introduced the following new definitions:
  • business day: any day of the week, except weekends and official holidays of the Federal Government;
  • tax residency certificate: a certificate issued by the Authority confirming the tax residency of a person in the state, in accordance with Article 53 of this DL; and
  • tax resident: a person resident in the state in accordance with Article 53 of this DL;
• Article 3 – Scope of the DL: the provisions of DL would also cover the administrative penalties imposed by FTA;
• Article 5 – Language: the person who submits any translated copies of data, information, records, and any other documents related to any tax to the FTA shall be responsible for the accuracy and correctness of such translated copies and shall bear all the associated costs;
• Article 10 - Voluntary disclosure: the voluntary disclosure scope would also include any error or omission discovered by the taxpayer even if such error or omission does not result in a difference of the tax due;
• Article 16 – The right to perform a tax audit: the notification period for a tax audit would be extended from 5 to 10 business days;
• Article 18 – Timing of the tax audit: the right to decide to conduct the tax audit outside official working hours would be extended to any person acting on behalf of the FTA Director General;
• Article 23 – Tax assessment: the notification period for a tax assessment would be extended from 5 to 10 business days from the date of its issuance;
• Article 24 – Administrative penalties assessment: the amount of administrative penalties would be capped at two times the amount of tax for which the penalty was imposed, without any minimum amount (currently, the administrative penalties are capped at three times the amount of tax with a minimum amount of AED 500);
• Article 25 – Tax crime and their penalties: the monetary penalty for tax evasion would be capped at three times the amount of tax for which the penalty was imposed instead of five times. Furthermore, monetary penalties not exceeding AED 1,000,000 combined with a prison sentence can be imposed on anyone who commits any of the following acts:
  • deliberately providing false information, data or incorrect documents to the FTA; and
  • deliberately concealing or destroying documents, information, data or other materials required to hold and provide to the FTA;
• Article 28 – Tax assessment review request: prior to filing for reconsideration of a tax assessment, the taxpayer would have the possibility to request a review of such assessment or part thereof and any related administrative penalties within 40 business days from the date of the notification of the assessment; and
• Article 45 - Conflict of interest: the restriction to perform or participate in any tax procedure for would be extended to FTA employees who have a personal or financial interest, or any other relationship between the employee and person which affects an independent decision being made.

The DL No. 28 of 2022 was published on 30 September via the official website of the FCA and will enter into force on 1 March 2023.