The UAE’s VAT Executive Regulation has undergone substantial amendments through Cabinet Decision No. 100 of 2024, effective from 15 November 2024. These amendments introduce new rules, expand existing provisions, and clarify many aspects of VAT regulations, helping businesses align more effectively with the UAE’s dynamic tax environment. These changes cover multiple areas, including exports, financial services, tax groupings, and deemed supplies. We have prepared a description of the substantive amendments and a comparative table of the key amendments to the original provisions.
Articles 30 and 31 stipulate important amendments to the export of goods and services. The new regulations alleviate the documentary obligations for zero-rating exports by allowing flexibility in the proof of export. Businesses now only need to retain one of the following documents:
Additionally, new conditions narrow the scope of services eligible for zero-rating when linked to UAE real estate or designated zones.
In line with the UAE’s growing focus on digital and virtual assets, Article 42 has been amended to exempt services related to virtual assets from VAT. This includes cryptocurrency trading, the transfer of ownership, and conversion services. These exemptions are backdated to January 1, 2018, reflecting the UAE’s commitment to fostering innovation and supporting emerging industries.
Article 29 clarifies that the purchase price for calculating profit margins must include all associated costs, such as shipping and handling fees, thereby offering businesses a clearer and more accurate approach to profit margin-based VAT calculations.
For deemed supplies, Article 5 introduces a threshold, allowing AED 250,000 output tax to be excluded from deemed supply reports in a 12-month period for government bodies and charities. In parallel, input tax recovery has been expanded (Article 53), allowing businesses to recover VAT on health insurance for employees and their dependents.
The updated Article 15 addresses VAT groups, emphasizing the need for members to make taxable supplies to remain in the group. This provides clarity to businesses on maintaining compliance within their VAT group structures.
A new provision (Article 14 bis) grants the Federal Tax Authority the power to deregister businesses that may undermine the integrity of the VAT system, ensuring compliance and preventing tax fraud.
Table of key amendments
Article | Original provision | Amendment summary |
---|---|---|
Article 1 | Definitions applied only to concerned persons and their legal representatives. | Expanded to include new definitions such as "Virtual Assets" and broadening "Notification" to all persons, not limited to legal representatives. |
Article 2 | Real estate supply is limited to sale and tenancy contracts. | Expanded to include any disposal form that results in a transfer of ownership. |
Article 3 (bis) | Government entity transfers were considered a supply. | Transfers of ownership between government entities are now exempt from VAT. |
Article 5 | No threshold for deemed supplies. | AED 250,000 threshold for output tax exclusion on deemed supplies for government bodies or charities within a 12-month period. |
Article 8 | Businesses could voluntarily register without providing business activity evidence. | Voluntary registration now requires evidence of carrying on or intending to carry on a business in the UAE. |
Article 14 (bis) | No explicit provision for deregistration for system integrity. | New power for the FTA to deregister businesses that pose a risk to the VAT system’s integrity. |
Article 15 | VAT groups could include members no longer making taxable supplies. | Members who stop making taxable supplies must be removed from the VAT group. |
Article 29 | Profit margin calculation based solely on purchase price. | Clarified that purchase price includes all related costs, including shipping, handling, etc. |
Article 30 | Documentary requirements for zero-rating exports were strict. | Businesses can now provide customs declarations, shipping certificates, or commercial evidence to prove exports. |
Article 31 | Broader scope for zero-rating services connected with the UAE or designated zones. | Narrowed scope of zero-rating services, particularly for those linked to UAE real estate or designated zones. |
Article 42 | No VAT exemptions for virtual assets. | Exemption for services related to virtual assets, including cryptocurrency trading and management, backdated to January 1, 2018. |
Article 53 | Limited input tax recovery, excluding employee benefits. | Expanded input tax recovery to include VAT incurred on health insurance for employees and their dependents. |
Article 59 | Simplified tax invoices could be issued under certain conditions. | New restrictions on issuing simplified tax invoices, aligning them with stricter criteria. |
Keep in mind
For businesses operating in the UAE, it is crucial to review these amendments in detail to ensure ongoing compliance with VAT obligations, particularly as the new rules come into effect from 15 November 2024.