VAT reforms in the UAE will take effect on January 1, 2023. Furthermore, on December 5, the country will deploy a new platform to facilitate frictionless transactions for taxpayers.

Gulf countries have long been noted for their low taxes, making the area more appealing to live and work in than many other parts of the world. The UAE is no exception, but it has already implemented many tax policies in an effort to enhance government revenue and diversify the economy away from oil.

In 2018, the UAE Ministry of Finance implemented a 5% Value Added Tax (VAT), which is levied on most products and services.

However, the Ministry indicated late last month that it would be implementing several VAT changes, all of which will take effect on January 1, 2023. The VAT rate, which remains steady at 5%, has not been adjusted. A total of 24 modifications were made to Decree-Law No.18 2022 on VAT, which was published in the official gazette (issue no. 736 of September 28, 2022).

The modifications are as follows:

  • Those who are registered and make taxable supplies may seek an exemption from VAT registration. However, all of their supplies must be zero-rated, and/or they must no longer manufacture any non-zero-rated goods.
  • To settle output tax, a 14-day timeframe for providing tax credit notes will be specified, in line with the time frame provided for issuing tax bills.
  • If required, the Federal Tax Authority may forcefully deregister registered people.

These modifications are consistent with worldwide best practices under the GCC unified VAT agreement and are based on a range of issues and experiences encountered across business sectors, as well as recommendations received from relevant parties.

The rules for companies in the UAE are as follows:

  • If a company’s taxable shipments and imports surpass the statutory registration limit of AED 375,000, the company must register for VAT.
  • Businesses can also voluntarily register for VAT if their supply and imports exceed AED 187,500.
  • Similarly, if a company’s costs surpass the voluntary registration level, it might register voluntarily. This is intended to allow new firms with no revenue to file for VAT.
  • Businesses in the UAE must document their financial transactions and keep accurate records.

The provision that registered people may seek for an exemption from VAT registration if all of their supplies are zero-rated or if they no longer make any supply other than zero-rated goods is one of the revisions made to Federal Decree-Law No.8 of 2017. Zero-rated supplies are property and service supplies that are taxed at zero percent. Certain meals and drinks, exported commodities, donated goods sold by charity stores, handicapped equipment, and prescription drugs are examples of zero-rated items that are established by the taxing authorities.

Other modifications include establishing a 14-day time window for issuing a tax credit note to settle output tax, which is consistent with the time frame for issuing tax bills.

Aside from these adjustments, the UAE will implement a 9% federal corporation tax on business earnings beginning on or after June 1, according to the Ministry of Finance. In the UAE, residential dwellings, bare land, public transportation, and the provision of some financial services are excluded from VAT. Typically, supplies from government entities are subject to VAT; nonetheless, this guarantees that government entities are not unjustly favored over private firms. The ministry also stated that if required, the Federal Tax Authority (FTA) may forcefully deregister individuals.

On December 5, the FTA will also unveil EmaraTax, a new platform designed to “substantially” improve taxpayer access to FTA services, tax payment, and refunds. The new online platform also significantly improves the FTA’s ability to manage taxes in the UAE, allowing for better, faster decision-making and earlier involvement with taxpayers who want assistance.

Once operational, taxpayers will benefit from an upgraded and online platform that will revolutionize the way they handle their taxes. The FTA will continue to deploy new services and features in stages until the first quarter of next year, including an EmaraTax app for mobile phones.

The authority also intends to provide daily webinars so that every taxpayer may learn more about the new platform. EmaraTax, which is being developed in accordance with the UAE’s Digital Government Strategy 2025 and is being led by Sheikh Mohammed bin Rashid Al Maktoum, Vice President, Prime Minister, and Ruler of Dubai, will also include a dedicated microsite educating users on how to use EmaraTax, as well as instructional videos, Frequently Asked Questions, and information on how to join the free webinars.

The introduction of the new platform is scheduled to coincide with the UAE’s National Day Holiday. For best Tax related advisory connect with our international tax advisory team at Finjuris.

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