Important VAT changes coming to Dubai as the authorities introduced amendments in the Value Added Tax (VAT). These amendments are made to simplify the tax process, which will make sure the companies can adjust to new regulations. The firms need to know about these regulations as these changes will affect compliance with VAT in the country.
The amendments are included in the Cabinet Decision of 2024, which gives details of new rules of VAT. The authorities of Dubai have refined the regulations to adapt to new economic requirements. These reforms will make the tax process easier for businesses in Dubai. Here is an overview of VAT changes that businesses need to know.
Important VAT Changes Coming to Dubai, UAE
The Federal Tax Authority of UAE updated the Federal Decree Law of 2017 on VAT tax in UAE, on 24th October 2024. There are about 30 changes made in the regulations which will be implemented from 15 November, 2024 which include different sectors such as real-estate, finances, transport, digital assets and more.
Primary Changes in VAT Tax in UAE
The update in VAT rules brings relief to many businesses in different countries. The main changes are discussed below.
Adding VAT and Virtual Assets on Crypto Currency
With the amendment in these regulations, virtual assets are treated as digital representation of value possibly used for investment, electronically traded or converted. However, digital representation of fiat money or financial securities is excluded. Transferring ownership of virtual assets (VA) like cryptocurrency and trade of virtual assets is now considered financial service.
The amendment will have a huge effect due to the increase in trade and use of virtual assets in Dubai. It will also help with transparency in the trade of virtual assets and also shows the UAE’s visionary approach regarding the regulatory framework of virtual assets and giving it a special position within Dubai’s VAT.
Increased Provision of Real Estate
Article 2 will help with the increased provision of real estate, including sale and lease contracts or any other form of transfer of ownership between different parties. It will also make sure every real estate trade is under the compliance of VAT and understand the implications of VAT on their business.
Tax on Deemed Supplies
Article 5 states that if a charity or government entity is involved in provision of deemed supplies to any other charity or government entity and its value is below AED 250,000, there will be no tax on it. However, if its value is above AED 250,000, it is taxable. With the help of this rule, the tax reporting on the government and charitable sectors of Dubai is simplified.
Registration and Deregistration of VAT
Here we will discuss the procedure of registration of VAT and deregistration in the UAE.
Voluntary Registration for VAT
Every business in the UAE is not required to register for VAT. However after the amendments, the voluntary registration process has also changed for businesses manufacturing out-of-scope supplies.
These companies are now also eligible for voluntary registration for VAT. It also mandates companies to provide the evidence that they will supply the goods in Dubai. The provision of documents is a must now, that is why it is important to seek help from a professional consultant in Dubai which will help you understand the amendments in VAT laws.
Important VAT Changes & Deregistration of VAT
The new amendments also gives authority to the Federal Tax Authority to deregister the companies, if they are not complying with the tax system. It also mandates the removal of the companies that are not supplying taxable goods from the VAT groups. It is important for businesses to continuously check the VAT groups and amendments in the regulation to make sure they are under compliance of tax law.
Zero-Rated VAT & Cross-Border Trade
Let us look at the effect of VAT changes UAE on zero-rated VAT and international transactions.
Documents for International Transactions
The new amendments in VAT regulations show the required documents for international transactions to be considered zero-rated VAT. The businesses can show different types of documents as proof such as customs entries, certificates of shipment and other commercial and official documents. This change will increase clarity in regulations which will help local businesses to stay compliant with the UAE’s VAT regulations.
Transport Services
Under the new amendments, in order for transport services to be considered zero-rated, the supply of goods from one place of UAE to another place in the UAE should be done by one supplier. This amendment is important for transport services hence, the transport companies must understand these amendments to comply with the tax system in the UAE.
Input Tax Compensation & VAT Changes UAE
The following points will help understand the effect of VAT changes on input VAT.
Input Tax Recovery on Employee Benefits
After the amendment in the law, the businesses are now able to recover the input VAT paid for their employee’s medical bills. However, there are certain legal obligations in different zones which must be checked.
Gross Margin Scheme
Another important change is made to explain that during the calculation of profit margin, the purchase price should include the cost of goods as well as any additional cost involved in buying of goods. Companies using the gross margin scheme need to consider this change to make sure they are complying with the VAT law in the UAE.
Tax on Invoices
There are some important changes made in the issue date of tax invoices in the following course of events.
- On the date of supply simple tax invoices are required to be issued.
- Within 14 days, brief tax invoices are required to be issued and delivered.
Important VAT Changes Coming to Dubai & its Effect on Businesses
The UAE VAT updates impact various business industries in the UAE including digital assets, real estate, international transactions and financial services. Understanding the VAT changes will help businesses to comply with the law and avoid any kind of fines.
- It is necessary for businesses to keep updated with the new VAT amendments, and upgrade their systems to ensure compliance and avoid any fines.
- The emphasis on VAT audits has increased by the federal tax authority in the UAE to make sure the companies are complying with the new VAT amendments. Businesses not complying with VAT changes UAE may face fines and other penalties.
- For businesses involved in international trade the amendments in VAT regulations are also important. The new changes affect the implication of VAT on export goods, which makes it necessary for businesses to understand the amendments and their compliance.
How to Remain Compliant with VAT Changes?
It is necessary for businesses to familiarize themselves with the new VAT updates to avoid any kind of fines or penalties by the tax authorities. Here are some important factors to keep in mind.
- Updating Accounting Software. The most important step is updating the company’s accounting software according to the new changes in VAT regulations.
- Training your Employees. Businesses should train the employees that handle the tax related work and accounting. Understanding the changes will help them avoid any kind of errors while filing for VAT.
- Work with Professionals. If you find it hard to understand the complex system of VAT, hire a professional consultant to make sure you are complying with the UAE tax law and new amendments. They can also help you identify any kind of issue beforehand and make it easy to resolve.
- Reviewing VAT Liabilities. It is necessary for businesses to regularly review their tax liabilities after the new amendments. This technique will help you understand any kind of risks involved and give you time to resolve them.
Final Words
At the end, there are certain important VAT changes coming to Dubai that we have highlighted and businesses must be mindful of. The government of UAE made these amendments to simplify the process of tax for different industries. At the same time, it is important for businesses to be updated to comply with the tax laws by updating their accounting software, training employees and hiring professionals.
Al-riyady can provide you expert and professional advice related to the new VAT regulations in the UAE. We have years of experience in tax consultancy, business feasibility study, business liquidation process, auditing and more.