UAE Announces New VAT Rules Starting from January 1st, 2023: Exemptions for Business and Registration for the 5%

On January 2018, the UAE introduced Value Added Tax (VAT) at the rate of 5%; however, The Ministry of Finance revisions recently made revisions to some of the provisions. These amendments will take effect from January 1st, 2023. You can leverage the expertise of VAT consultants in Dubai to ensure complete compliance with the new adjustments.

VAT Definition

The VAT is a type of general consumption tax that countries impose on most supplies of goods and services that are bought and sold. It is one of the most common types of consumption tax. The UAE imposes VAT on tax-registered businesses at a rate of 5 percent on a taxable supply of goods or services at each supply chain step. Make sure to take advantage of VAT registration services in the UAE for optimal observance of taxes.

UAE VAT changes

Twenty-four changes were made to the VAT and published in the official gazette. Among the amendments is the provision that registered persons are allowed to apply for an exception from VAT registration if all their supplies are zero-rated or if they no longer make any supplies other than zero-rated supplies. Other amendments include setting 14 days to issue a tax credit note to settle output tax, in line with the time frame specified for issuing tax invoices. These amendments have been made in line with international best practices considering the GCC Unified VAT Agreement. You can benefit from professional VAT consultancy services in Dubai and the UAE to ensure you adhere to the changes completely.

More UAE VAT Changes

  • The VAT Amendment Law inserts a new Article 79 bis into the VAT Law, which means that the standard five-year period can be increased, giving the FTA more time to challenge VAT filings.
  • There are also changes to increase the period for the FTA to raise a tax audit when a voluntary disclosure is made. A taxable person makes a voluntary disclosure to notify the FTA of an error or omission in their tax return, tax assessment, or tax refund application.
  • In addition, a voluntary disclosure can no longer be made after five years from the end of a period.


UAE VAT Changes Explained

The necessity to issue a credit note within 14 days is a new addition to the VAT Law. Therefore, businesses must ensure they have appropriate systems in place to correctly identify cases where a tax credit note needs to be issued and that it is issued within 14 days. Systems should also be updated to ensure a tax credit note is issued if an incorrect tax treatment is applied. The right VAT consultants in Dubai can help you put these systems in place to make the process hassle-free.

UAE VAT Rules for Businesses: UAE VAT registration

Businesses must register for VAT if their taxable supplies and imports exceed the mandatory registration limit of AED 375,000. They can also register for VAT voluntarily if their supplies and imports exceed AED 187,500. Furthermore, a business may register voluntarily if its expenses exceed the voluntary registration threshold. Choosing the right VAT consultants in Dubai is crucial to easing all these registrations.

UAE VAT-Exempt Sectors

The following categories of supplies are exempt from VAT:

  • The supply of some financial services
  • Residential properties
  • Bare land
  • Local passenger transport

Next 5 Important Changes Business Owners Should Know

2023 will see many more amendments to the tax laws and procedures. These are the subsequent five essential changes that the right VAT consultants in Dubai can help smooth for your company:

  • The 14-day time limit for tax credit notes and loss of input credit
  • Issuing tax invoices even if VAT is not charged
  • Invoices for the import of goods
  • Mandatory, voluntary disclosure, even if no additional tax is payable
  • Reduction in the maximum amount of administrative penalties

Take Control of Your Tax Compliance and Avoid Penalties in UAE

Ignoring tax compliance could harm business continuity in addition to being costly financially. The following actions could be taken by businesses to take charge of their tax compliance:

  • Ensuring access to the email and telephone registered on the e-services portal
  • Updating the email and phone on the e-services portal
  • Periodically reviewing the e-services portal
  • Reviewing the VAT returns submitted
  • Selecting the right VAT consultants in Dubai

Taxes might be intimidating, but they cannot be sidestepped. Businesses should ensure doing due diligence in terms of their processes of tax observance. Non-compliance with tax laws may have adverse financial effects as well as effects on the ongoing operations of the business. Therefore, companies must hire the right VAT registration services in the UAE and the best VAT consultancy services in Dubai.