Understanding UAE VAT Amendments for 2024
The UAE Tax authority has published the VAT Executive Regulations through Cabinet Decision No.100 of 2024 which is with effect from 15 November 2024. FTA issued a Public Clarification on 14 March 2025, through this major changes in the new Executive Regulations have been clarified which include provisions for Zero-rating, processes for registration and de-registration, and various transactions' VAT treatments. In this article, let us understand the major concepts which have been cleared by the authority.
Introduction of New Definitions
Several new definitions have been introduced to align with evolving taxation needs. These include:
Certain definitions have been introduced to clarify and align the evolving taxation needs. Below are a few definitions introduced in Article 1:
➤ "Business Day" - Defined to align with the Tax Procedures Law.
➤ "Standard Rate" -Clarified that the 5% VAT rate is applicable as per Article 3 of the VAT Decree Law.
➤ "Virtual Assets" -Virtual Assets include cryptocurrencies like Bitcoin and Ethereum which ensure that they fall under the scope of VAT while the digital representation of fiat currency is excluded.
Changes in VAT Registration and Deregistration
➜ Mandatory and Voluntary Registration: While a taxable person registers for VAT under the Voluntary registration criteria, the conditions have been specified including the proof of business activities in the UAE
➜ Tax Deregistration: In order to prevent misuse, the FTA has the authority to de-register VAT of businesses that fail to complete the de-registration process.
➜ Protection of the Tax System: Even if the businesses have not submitted the VAT de-registration application, the FTA hold the right to de-register the VAT number of entities that is longer meet the condition to hold the VAT registration.
➜ Group Tax Registration Changes: To ensure transparency, the tax group must notify the authority in case any of the member ceases their taxable activities.
Amendments to VAT on Supplies and Zero-Rating
➠ Supply of Goods: The Executive Regulations now affirm that any disposal of real estate transferring ownership is considered as a taxable supply.
➠ Composite Supplies: Any supply which consists of multiple components which is provided by a single supplier where the prices of each component are not identified may qualify as a single supply.
➠ Deemed Supplies: Commercial gifts and samples which has an output tax of AED 2000 or more in 12 months shall consider as deemed supplies and the value of AED 500 per recipient within 12 months condition for deemed supply have revoked.
Zero-Rating Provisions
➺ Export of Goods: The documentation requirements to prove the export of goods from UAE have been relaxed. As per the new Executive Regulations, a combination of customs declaration, shipping certificates and clearance documents suffice to prove the export of goods.
➺ Export of Services: The amendments expand the scope of zero-rating services while clarifying exclusions, including services linked to real estate, transportation, and in-country consumption.
➺ International Transport Services: Any entity that provides local transportation services can qualify as zero-rated only if it is in connection with the international transportation and service provided by the same provider who provides the international transportation.
➺ Healthcare Services: Healthcare services continue to qualify for zero-rating, ensuring accessibility.
➺ Financial Services: The new rules have provided clarity of VAT treatment of financial transactions including Islamic Finance structures.
Input Tax Recovery and Exemptions
➦ Input Tax on Exempt Supplies: The rules for claiming input VAT relating to the exempt supplies have been updated which ensures more precise mechanism.
➦ Apportionment of Input Tax: The new amendments have refined the process to allocate input VAT across taxable supplies and exempt supplies.
➦ Adjustments under Capital Assets Scheme: Capital Asset Scheme adjustments for the internally developed Capital Assets have been explained. The first year of the Capital Asset Scheme shall be the first year the asset is brought into usage irrespective even if the asset was ready for usage in the previous year.
VAT Invoicing and Record-Keeping
➜ Tax Invoices: Certain amendments have been specified in the requirements to be included in the tax invoices which include mandatory details and formatting.
➜ Record-Keeping: To ensure compliance and updated requirements, businesses must retain VAT records for longer durations.
Special Provisions for Government and Foreign Entities
➦ Government Transfers: Certain real estate and project transfers between governments are not outside the scope of VAT.
➦ Foreign Governments and Diplomatic Entities: The amendments update conditions for VAT repayment to foreign diplomatic missions and international organizations. The new Executive Regulations have specified amendments in conditions for VAT repayments for government diplomatic missions.
Conclusion
It is very important to be updated with the evolving tax regulations in the country. Businesses operating in the UAE shall carefully review these changes to ensure compliance with the VAT regulations and avoid penalties. Appointing an expert Tax Agency like Flying Colour Tax Consultant LLC for handling your business tax matters will make sure your business is compliant with the tax regulations and new updates have been taken care of.
To learn more about Key Amendments to the UAE VAT Executive Regulation in 2024, book a free consultation with one of the Flyingcolour team advisors.
Disclaimer: The information provided in this blog is based on our understanding of current tax laws and regulations. It is intended for general informational purposes only and does not constitute professional tax advice, consultation, or representation. The author and publisher are not responsible for any errors or omissions, or for any actions taken based on the information contained in this blog.