Picture for illustrative purposes only. EXPAT MEDIA

Starting on January 1, 2023, the UAE will impose changes in its Value Added Tax (VAT) laws and tax procedures that are expected to have a significant impact on businesses. Since 2018, the UAE introduced 5 percent VAT on most goods and services. The tax is levied at the point of sale.

Reduced tax fines

As part of changes to the UAE VAT law, the maximum administrative fine would be reduced to 200 percent of the tax amount instead of 300 percent starting January 1, 2023. According to the Federal Tax Authority (FTA), the minimum threshold of Dh500 for penalties would also be removed to allow the FTA to impose fines of less than Dh500.

14-day time limit for claims

Sellers will have 14 days to claim back excess output tax charged on a tax invoice during discounts, sales returns or sales cancellations. Sellers must issue a tax credit note within 14 days of the discount, sales return or sales cancellation, otherwise they would forfeit the claim.

Issuing tax invoices without due VAT

Sellers issuing a tax invoice, even if tax is not due, must pay the tax amount to the FTA starting in 2023. Companies often title their invoices as “tax invoices” even if no VAT is charged. The updated law clears the ambiguity on tax liability in such cases.

VAT invoices for importation

Sellers must issue invoices for any importation service on which reverse charge is applicable. These invoices must be kept by taxpayers for their record. The new law will ensure that taxpayers recover credit only for verified imports.

Mandatory disclosure

Taxpayers would be required to submit a disclosure in case of error or omission in the original VAT return for zero-rated supplies or VAT-exempt supplies or goods under reverse charge. Penalties could also apply for the errors in the original VAT returns. ICA/Expat Media
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