GCC Indirect Tax Weekly Digest

ZATCA announces criteria for selecting taxpayers in the seventh wave of e-invoicing

The Zakat, Tax, and Customs Authority (ZATCA) have announced the selection criteria for resident taxpayers participating in the upcoming seventh wave of the e-invoicing integration phase. 

Key considerations: 

• Resident taxpayers with taxable revenue exceeding SAR 50 million (c. $13.4m) as reported in the VAT returns for the calendar years 2021 or 2022 are required to integrate their e-invoicing systems with ZATCA for clearance and/or reporting of e-invoices.
• Integration for the seventh wave of resident taxpayers is scheduled to go live on the ZATCA Fatoora Portal starting from 1 February 2024. This provides these taxpayers with at least six months to ensure compliance with the integration phase requirements.

Based on past experience, we expect ZATCA to formally notify the selected taxpayers about the seventh wave timeline. 

This announcement comes within a span of less than 60 days after the sixth wave, indicating that upcoming waves might be revealed soon.  Taxpayers who were not included in previous waves should therefore plan ahead.  

Timely integration with ZATCA requires substantial IT and human resources, making proactive preparation crucial for a smooth compliance process.

New Executive Regulation of Federal Decree-Law No. 28 of 2022 on Tax Procedures has been published

The United Arab Emirates (UAE) Federal Tax Authorities (FTA) has published the Cabinet Decision No. 74 of 2023 on the Executive Regulation of Federal Decree-Law No. 28 of 2022 on Tax Procedures (Tax Procedures Executive Regulations).

The new Tax Procedures Executive Regulations were effective from 1 August 2023. The provisions relating to the conditions for registering juridical tax agents come into effect on 1 December 2023.

To support in communicating the changes, the FTA has issued the Tax Procedures Public Clarification, Issuance of a New Tax Procedures Executive Regulations (TAXP006). This clarification details the differences between the new Tax Procedures Executive Regulations and the now repealed Cabinet Decision No. 36 of 2017.

The New Tax Procedures Executive Regulations cover a wide range of matters, and should be reviewed by taxable persons in the UAE to determine whether changes are required to current tax processes and positions. 

Deloitte will publish a detailed alert on the main changes and the expected impact.  

MoF targets the introduction of “E-billing System” system from July 2025

The Ministry of Finance (MoF) recently announced five major strategic transformational projects, including the development of an advanced national electronic billing system (E-Billing System). 

The E-Billing System is expected to automate the procedures for filing tax returns to facilitate filing tax returns, improve tax compliance, and reduce cases of tax evasion. The phased project is expected to be completed by July 2025.

We expect further details to be issued by the MoF, including the timeline of implementation, and details on the nature, extent of standardization, and process required for the issuance of invoices and credit notes.

Implications for businesses 

E-invoicing has been shown to reduce instances of tax evasion and simplify VAT compliance. However, it represents a new challenge for UAE businesses who should start preparing early for the new obligations in advance.

The UAE is following a growing trend of tax digitalisation and joins other countries that have commenced the journey to mandatory e-invoicing, such as the Kingdom of Saudi Arabia (KSA). 

FTA issues e-Commerce reminders and guidance

The FTA has reminded taxpayers to abide by the new Emirate-specific Value Added Tax (VAT) reporting requirements in relation to e-Commerce following recent updates to the VAT legislation in the UAE.  

The new reporting rules align to the Emirate in which supplies are received, and should apply to taxpayers that have made e-Commerce supplies in the calendar year ending 31 December 2022 and the value of these e-Commerce supplies exceeded AED100 million. Non-compliance may result in penalties.  

The FTA has also recently published the following user manuals for e-Commerce reporting:  

• Submit VAT Voluntary Disclosure for e-Commerce reporting
• Resubmit VAT Voluntary Disclosure for e-Commerce reporting
• VAT 201 – VAT Returns for e-Commerce reporting
• Final VAT 201 Return for e-Commerce reporting

The manuals are prepared to help taxpayers navigate through the EmaraTax portal for e-Commerce reporting purposes.

Reminder: 31 August deadline for foreign business VAT refund applications

The deadline of 31 August 2023 for qualifying non-resident businesses to submit a claim for VAT in the UAE under the Business Visitor Refund scheme is fast approaching.

Foreign businesses eligible to apply that have not yet done so should take urgent action to complete the application requirements before the deadline.

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.