The VAT Executive Regulations (VAT ER) in the UAE have undergone significant amendments, which can bring about significant implications for your business. The revised set of norms has come into effect from 15th November 2024. Businesses across different verticals are likely to be affected, while the consequences will be specific to the financial services industry.
In this edition, we have outlined the key amendments every business should know.
VAT Exemption for Financial Services
Under Article 42, the VAT exemption for financial services companies has been expanded. The revised provisions include:
- Fund management services: This refers to services provided by a fund manager to licensed investment funds, like managing operations, investments, and performance.
- Virtual assets: According to the revised norms, the exemption now covers the transfer and management of virtual assets like cryptocurrencies. These changes are retrospective and will affect transactions from January 1, 2018. These exemptions will simplify compliance and eliminate VAT invoicing obligations, but they can complicate input VAT recovery, particularly for fund managers. With professional VAT Consultancy Services in UAE from experts, businesses can simplify this process.
Zero-Rate for Export of Goods
Amendments have been made to Article 30, which clarifies the documentation requirements for exporting goods under a zero-rate VAT. The amendments offer a greater degree of flexibility, acknowledging that different export scenarios may require varying documents.
Now, businesses can retain customs declaration or the Bill of Lading as evidence for applying the zero rate. This will help organizations address challenges related to obtaining necessary documentation for exports.
Zero-Rate for Services and Transport
Changes have also been made to the zero-rate VAT application on services, particularly regarding international transportation and related services. These include:
- Export of services: Certain services like installation of goods or real estate services don’t qualify for the zero rate any longer.
- International transport: Only the international segment of transportation can be zero-rated unless provided by the original service supplier.
- Transport-related services: The amendments clarified certain conditions for zero-rating services related to the operation or maintenance of different means of transportation.
Input VAT Recovery on Health Insurance
Exemption for Supplies by Government Entities
According to Article 3 (bis), a new provision has been included to exclude certain transactions between government entities from VAT. These include:
- Transfer or disposal of government real estate or buildings
- The right to use or exploit these assets
Other Key Changes
Some of the other amendments that impacted different areas are:
- Tax invoices: New timelines for issuing summary tax invoices (14 days after the calendar month)
- Input VAT recovery: The amendment clarified how to calculate input VAT recovery entitlement, particularly for businesses with tax years shorter than 12 months
- Composite supply rules: Clarifications on VAT treatment for supplies consisting of multiple elements
- Profit margin scheme: Following the amendments, the “purchase price” now includes all related costs and fees beyond just the product price
- VAT registration cancellation: The FTA can now cancel VAT registrations if businesses fail to meet certain conditions
