VAT Public Clarification

On October 2, 2024, the United Arab Emirates (UAE) Federal Tax Authority (FTA) announced significant amendments to the Executive Regulation of Federal Decree-Law No. 8 of 2017 on Value Added Tax (VAT) through Cabinet Decision No. 100 of 2024.

These amendments, which took effect on November 15, 2024, encompass over 30 updates across various articles, aiming to enhance clarity and compliance within the UAE’s VAT framework.

Key Amendments:

1. Financial Services:

• The scope of financial services exempt from VAT has been refined. The amendments provide clearer definitions and guidelines, ensuring that businesses in the financial sector can more accurately determine VAT applicability on their services.

2. Single Composite Supply:

• A new provision has been introduced to define “single composite supply.” This addresses scenarios where a supply consists of multiple components, clarifying when such supplies should be treated as a single supply for VAT purposes.

3. Voluntary Registration Threshold:

• The threshold for voluntary VAT registration has been updated to AED 187,500. This adjustment allows smaller businesses to register for VAT voluntarily, enabling them to reclaim input tax and enhance their compliance posture.

4. Tax Invoices and Record-Keeping:

• Amendments have been made to the requirements for tax invoices and record-keeping. These changes aim to streamline administrative processes and ensure that businesses maintain accurate and compliant records.

5. Designated Zones:

• Clarifications have been provided regarding the treatment of designated zones, particularly concerning the movement of goods and the applicability of VAT. This ensures that businesses operating within these zones have a clear understanding of their VAT obligations.

Implications for Businesses:

These amendments reflect the UAE’s commitment to refining its tax system in line with international best practices. Businesses operating in the UAE should review these changes carefully to ensure compliance and optimize their VAT management strategies. It is advisable to consult with tax professionals or refer to the official FTA publications for detailed guidance on specific amendments.

For a comprehensive understanding of all the amendments, businesses can refer to the updated Executive Regulation available on the FTA’s official website.

Staying informed and proactive in understanding these regulatory changes is crucial for businesses to maintain compliance and leverage any benefits arising from the updated VAT framework.