UAE: Amended VAT law provisions; new article related to statute of limitations

The president of the United Arab Emirates issued the Federal Decree-Law No. (18) of 2022 to amend certain provisions of the Federal Decree-Law No. 8 of 2022 on value added tax (VAT). The amended provisions will become effective from 1 January 2023.

The Federal Decree-Law No. (18) amended 25 existing articles and introduced a new article related to the statute of limitations.

The amended provisions include:

• Definitions
• Supply of goods
• Other out-of-scope transactions
• Registration exceptions
• Cases of tax deregistration
• Special date of supply
• Place of supply of goods (continuous supply)
• Place of supply in special cases (transport-related services)
• Place of residency (agent/principal)
• Value of supply and deemed supply for related parties
• Supply/import of goods and services that are subject to zero rate
• Reverse charge
• Recovery of recoverable input tax in the tax period (imports)
• Recovery of tax by government entities and charities
• Instances and conditions for output tax adjustments (additional case)
• Mechanism for output tax adjustment
• Conditions and requirements for issuing tax invoices (obligation to pay VAT)
• Date of issuance of tax invoice (for continuous supplies)

The tax authority has also introduced a new article relating to the statute of limitations via the amendment of VAT law (Article 79 bis), which sets out the following:

• With certain exceptions, as specified below, the tax authority may not conduct a tax audit or issue a tax assessment after the expiration of five years from the end of the relevant tax period.
• The tax authority may conduct a tax audit or issue a tax assessment after five years from the end of the relevant tax period if it notifies the taxable person of the tax audit before the expiration of the fifth year, provided that the tax audit or issuance of tax assessment is completed within four years from the date of such a notice.
• The tax authority may conduct a tax audit or issue a tax assessment after the fifth year from the end of the relevant tax period only if the audit or assessment relates to a voluntary disclosure submitted during the fifth year from the end of the tax period, provided that the tax audit or assessment is completed/issued within one year from the date of voluntary disclosure submission.
• The article also permits amendment of the referred periods by virtue of a separate cabinet decision.
• Note that voluntary disclosures are not allowed to be submitted after five years from the end of the relevant tax period.
• In cases of tax evasions or non-tax registrations, the tax authority may conduct a tax audit or issue a tax assessment within 15 years from the end of the tax period in which the tax evasion occurred or from the date on which the taxable person was required to perform tax registration.

The amendment of Article 79 bis raises particular concern for the registrants who have not yet claimed VAT refund within a five-year period. As a result of the above changes, it is clear that the tax authority would not be permitted to audit the periods beyond five years, which is an inseparable part of the VAT refund process.

Read an October 2022 report prepared by the KPMG member firm in the United Arab Emirates