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GCC Indirect Tax Weekly Digest
November 25, 2022
VAT Regulations amended
The United Arab Emirates (UAE) Federal Tax Authority (FTA) has published an amended version of the Executive Regulation of the Federal Decree-Law No. 8 of 2017 on Value Added Tax (UAE VAT Regulations). The amendments are effective from 1 January 2023.
Article 3 has been expanded with a provision that specifies the functions of a member of a board of directors performed by a natural person, for any government or private sector establishment, is not considered a supply of services. Therefore, the performance of such a function would be out of scope of VAT and VAT would not be applicable on the remuneration paid to a member of a board of directors.
Accordingly, the FTA has published a VAT Public Clarification (VATP031) which provides guidance on how to apply the new provision and determine the resulting VAT obligations on impacted persons prior and post 1 January 2023.
In addition, Article 72 of the UAE VAT Regulations on recordkeeping requirements has been amended. Most notably, specific rules have been introduced in relation to taxable supplies made through electronic commerce (i.e. via electronic means, an electronic platform, a store in social media, or other electronic applications).
Where taxable supplies made through electronic commerce exceed AED 100 million during the calendar year, the supplies must be recorded according to the Emirate in which the supply is received. The Article also sets out the timelines applicable to the new rules.
FTA introduces a refund mechanism for VAT incurred on building and operating mosques
The UAE FTA has introduced a mechanism for refunding Value Added Tax (VAT) incurred on constructing and operating mosques. The mechanism has been introduced via Cabinet Decision No. 82 of 2022.
The Cabinet Decision sets out the eligibility criteria and process for applying for a refund of VAT incurred on the construction of operation of a mosque. Claims may be made for VAT incurred on the construction or operation of a mosque since 1 January 2018.
In addition, the FTA has published Ministerial Decision No. 162 of 2022 on the determination of timelines and frequency of submission of refund requests for input tax incurred on the construction and operation of mosques.
FTA publishes VAT Public Clarification on amended VAT Law
The FTA has published a VAT Public Clarification (VATP030) on the recent amendments to the UAE VAT Law.
The Public Clarification provides an overview of the amended provisions, examples, and further information on the FTA’s interpretation of the amendments.
The amendments impact a wide range of areas of the Law and also introduce a new article on the statute of limitations for the FTA to conduct tax audits. The amendments are effective from 1 January 2023.
For more information about the amended UAE VAT Law, please refer to Deloitte’s recent alert or email any of the contacts listed below.
Dubai Customs issues Customs Notice on attestation of commercial invoices
On 2 November 2022, Dubai Customs issued Customs Notice No. 11/2022 in relation to a new procedure on attestation applied on the commercial invoice by the Ministry of Foreign Affairs & International Cooperation for imported goods into Dubai Mainland. The new rules will come into effect on 1 February 2023.
The notice includes the below process to be followed by the importers:
- AED 150 should be collected for attestation of each commercial invoice of imported goods valued at AED 10,000 or more.
- To submit an import or import for re-export declaration, the importers must enter the electronic attestation reference number issued for each attested invoice by the Ministry of Foreign Affairs and International Cooperation into the customs electronic systems (e.g., Mirsal II), if the attestation fee is paid before the customs declaration is completed.
- Importers may complete the payment of attestation fees in line with the payment method described herein within a maximum of fourteen days from the date the customs declaration on has been completed.
- According to the terms of Cabinet Decision No. (38) of 2022, the Ministry of Foreign Affairs and International Cooperation shall impose administrative fines on non-compliant clients who fail to obtain the necessary attestation on their invoices for imported goods after the period referred to in Article (3) has passed.
- The Ministry of Foreign Affairs and International Cooperation's document attestation service is available here.
For more details, please refer to the full notice.
The second wave of the e-invoicing integration phase
The Zakat, Tax and Customs Authority (ZATCA) has initiated contact with taxpayers to obtain their readiness details in preparation of the second wave of the e-invoicing integration phase. We understand that the selected taxpayer must attend to ZATCA's request. Although ZATCA has not yet formally defined the second wave selection criteria, we expect additional public communication from ZATCA on the subject any time soon.
We also anticipate that ZATCA will officially communicate (through letters similar to the first wave of the integration phase) with the selected taxpayers in the coming days to formally inform them about the second wave timelines by providing taxpayers with at least six months to integrate their IT system for clearance and/or reporting.
Other taxpayers will have to integrate in subsequent waves of which the second wave is the next to come, therefore if you were not a part of the first wave, we recommend you to start planning ahead as you might be part of the upcoming second wave.
In 2021, the ZATCA introduced e-invoicing in the Kingdom of Saudi Arabia. Phase one of the e-invoicing implementation, the generation phase, was applicable on 4 December 2021 for all taxpayers. Phase two of the implementation, the integration phase, will go live on 1 January 2023 for the first wave of taxpayers.
This digest is for information purposes only and should not be construed as advice. It does not necessarily cover every aspect of the topics with which it deals. You should not act upon the contents of this alert without receiving formal advice on your particular circumstances.