Tax Flash

Amended Article

Summary of Amended Provisions

Article 3 – Supply of services

• Introduced clause 2 explicitly states that the functions of a member of a board of directors, performed by a natural person appointed as such for any government entity or private sector establishment, shall not be considered a supply of services.

KPMG comment:

This amendment effectively removes the obligation for independent directors to apply for VAT registration and charge VAT on their remunerations. Equally, there would be no obligation for the registrant in the UAE to account for VAT under the reverse charge mechanism when receiving directors’ services from non-resident directors.

Article 72 – Record Keeping of the Supplies Made

• The amended clause 3 adds additional clarification that if the place of establishment of the Taxable Persion is in the UAE, the taxable person must keep records of the transaction to prove the Emirate in which the place of establishment is located.
• Further, a number of new clauses (4,5 and 6) were added that deal with specific rules for record-keeping in cases where supply is made through electronic commerce.
• If the value of the taxable supplies made by the taxable person through electronic commerce exceeded AED 100,000,000 during the calendar year, he must keep records of the transaction to prove the Emirate in which the supply is received in the following way:
  • Starting from the first tax period that begins on or after July 1, 2023, for 18 months (where the prescribed threshold was exceeded during the 2022 calendar year).
  • For 2 years commencing from the first tax period of the calendar year that begins after the date on which the threshold was exceeded.
• For the purposes of the above, electronic commerce refers to the process of selling goods or services through electronic means, an electronic platform, a store in social media, or electronic applications in accordance with criteria and conditions determined by the Minister.

KPMG comment:

All businesses with e-commerce supplies exceeding the above threshold should review their current methodology of Emirates reporting and adjust in accordance with the new rules.