Bloomberg Tax
Nov. 10, 2022, 8:00 AM

United Arab Emirates VAT Law Amendments and the Impact for Businesses

Parwin  Dina
Parwin Dina
Global Tax Services

Federal Decree-Law No. (18) of 2022 (the VAT Amendment Law), issued on Sept. 26, 2022, makes a number of important changes to the United Arab Emirates VAT Law (Federal Decree-Law No. 8 of 2017), from Jan. 1, 2023. The Executive Regulations on the VAT Law (Cabinet Decision No. 52 of 2017) have as yet not been amended.

In this article we look at some of the most significant changes and what they mean for businesses.

Tax Audits

Some of the most important changes in the VAT Amendment Law relate to the time period for the Federal Tax Authority (FTA) to raise a tax audit or issue a tax assessment.

Under the current law, in Article 42 of the Federal Law on Tax Procedures (Federal Decree-Law No. 7 of 2017), the FTA generally cannot conduct a tax audit after five years from the end of a tax period (increased to 15 years in the case of tax evasion or where a taxpayer fails to register for VAT).

The VAT Amendment Law inserts a new Article 79 bis into the VAT Law which means that the standard five-year period can be increased, giving the FTA more time to challenge VAT filings.

Key points to note are:

  • The FTA can undertake a tax audit, or issue a tax assessment more than five years after the end of a tax period, if they notify the taxpayer of a tax audit before the end of the five-year period, and either complete the audit or issue a tax assessment within four years from the date they notified the taxpayer of the tax audit. This provides the FTA with a lot more time to raise a tax audit. For instance, if a taxpayer’s tax period was the quarter ending March 31, 2019, the FTA could notify the taxpayer of a tax audit on March 30, 2024, and would need to complete the audit or issue a tax assessment within the next four years (i.e. by March 30, 2028, which is nearly nine years from the tax period in which the taxpayer submitted a VAT return).
  • The 15-year period for non-registration or tax evasion still applies. Tax evasion is defined in the VAT Amendment Law as using illegal means to reduce the amount of VAT due, non-payment of VAT, or claiming a VAT refund to which the taxpayer does not have the right.
  • There are also changes to increase the time period for the FTA to raise a tax audit when a voluntary disclosure is made. A voluntary disclosure is made by a taxable person to notify the FTA of an error or omission in their tax return, tax assessment, or tax refund application. It is generally made via the e-services portal of the FTA website.
  • Under the VAT Amendment Law, the FTA can conduct a tax audit more than five years after a tax period where a taxpayer submits a voluntary disclosure in the fifth year from the end of the period, provided that the tax audit is completed or the tax assessment is issued within one year from the date of submission of the voluntary disclosure. This means that in the case of a return in the quarter ending on Dec. 31, 2023, for instance, if a voluntary disclosure is made in June 2028, the FTA can conduct a tax audit providing the audit is completed or the tax assessment is issued before June 2029.
  • In addition, a voluntary disclosure can no longer be made after five years from the end of a period.


The significant increase in the period for the FTA to raise tax audits, combined with the tightening up of the use of voluntary disclosures, should be a prompt for all taxpayers to ensure their tax affairs are in order.

In particular, it is advisable to review previous VAT filings and ensure any corrections are made via a voluntary disclosure within five years of the end of the relevant period.

After this five-year period has expired, no corrections via a voluntary disclosure will be permitted. This is a change to the current position where audited taxpayers could correct any errors by using a voluntary disclosure.

It should also be borne in mind that a voluntary disclosure in the fifth year would also extend the period for the FTA to conduct a tax audit.

Tax Credit Notes

Article 62(2) of the VAT Law has been amended so that if the VAT calculated on a supply exceeds the amount that should have been charged, a tax credit note needs to be issued within 14 days of the date any of the following occur:

  • The supply was canceled;
  • The VAT treatment of the supply has changed due to a change in the nature of the supply;
  • The previously agreed consideration for the supply was amended;
  • The recipient of goods or services returned them to the supplier and was refunded; or
  • If VAT was charged in error or an incorrect tax treatment was applied. It should be noted that the requirement to issue a tax credit note where there is an incorrect tax treatment is a new addition in the VAT Amendment Law.


The requirement to issue a credit note within 14 days is a new addition to the VAT Law. Businesses should therefore ensure they have appropriate systems in place to correctly identify cases where a tax credit note needs to be issued, and that this is issued within the 14-day period.

Systems should also be updated to ensure that if an incorrect tax treatment was applied (e.g., incorrectly applying a standard VAT rate), a tax credit note is issued.

Extended Tax Invoice Requirements

The current VAT Law is silent on the deadline for issuing a tax invoice where there is a periodic supply or where there are consecutive invoices.

A new amendment to Article 67(1) of the VAT Law means that in these cases a tax invoice will have to be issued within 14 days of the date of supply.


This can potentially have a wide scope as periodic supplies can cover a number of different situations. For instance, they can include maintenance contracts, the continuous supply of goods or services, and even telecom and internet services.

Businesses making periodic supplies should review both their current contractual arrangements and their systems to ensure they have the procedures in place to issue tax invoices within 14 days of each supply.

In particular, businesses will need to ensure that the correct enterprise resource planning settings are in place to correctly capture and categorize these supplies. This will also include ensuring that they correctly identify the date of supply, as the 14-day period begins from the date of supply.

Under Article 26 of the VAT Law, the date of supply of periodic payments is the earlier of:

  • The date of the issue of the tax invoice;
  • The date payment is due, as shown on the tax invoice;
  • The date payment is received; and
  • One year from when the goods or services were provided.

Although there is an element of circularity here, this would mean, for instance, that a supplier would need to issue a tax invoice within 14 days of the date payment is received or due in most cases.

New Zero-Rated Supplies

Article 45 of the VAT Law has been amended to include the following within the categories of zero-rated supplies:

  • The import of means of transportation;
  • The import of goods related to the means of transportation;
  • The import of rescue planes and ships; and
  • The import of goods related to preventive and basic healthcare services.

Zero-rated supplies are levied at a 0% rate of VAT, but input tax deductions on purchases are permitted (unlike exempt supplies). This can in many cases create a VAT refund for the excess input VAT.


Currently these imports would be subject to VAT at the standard rate.

After Jan. 1, 2023, importers of any of these goods should ensure that they correctly levy VAT at the zero rate and ensure that import documentation such as bills of lading, commercial invoices, and customs declarations clearly support the nature of the imports to ensure that the zero rate can apply.

Restriction of Domestic Reverse Charge

The UAE applies a domestic reverse charge mechanism to certain supplies which requires the taxable recipient of the supply to account for VAT on the supply rather than the supplier.

Under the current law this applies to supplies of crude or refined oil, unprocessed or processed natural gas, or any hydrocarbons where the recipient intends to either resell the goods or to use them to produce or distribute any form of energy.

The VAT Amendment Law restricts the reverse charge to “pure hydrocarbons” as opposed to all hydrocarbons. Pure hydrocarbons are defined as pure combinations of hydrogen and carbon.


Suppliers of hydrocarbons that are not pure hydrocarbons will need to account for VAT at the standard rate on their supplies from Jan. 1, 2023, unlike supplies of crude oil and natural gas which are zero-rated.

Similarly, recipients of such supplies will no longer need to account for VAT under the reverse charge mechanism.

As such, both affected suppliers and recipients should ensure that their business processes are updated to correctly identify affected supplies and ensure that the correct VAT treatment is followed.


The VAT Amendment Law amends the place of residence of agents and principals.

Under the current law, an agent’s place of residence is the same as the principal if the agent:

  • Regularly exercises the right of negotiation and enters into agreements in favor of the principal; or
  • Maintains a stock of goods to regularly fulfill supply agreements for the principal.

The VAT Amendment Law amends Article 33 of the VAT Law so that the place of residence of the principal is now the same as the agent.


This is important, as generally the supply of goods or services by an agent in the name of (and on behalf of) a principal is treated as a supply by the principal.

In a case where the principal is located in the UAE but the agent is in a foreign jurisdiction, the place of residence of the principal would be the UAE. Under the new provision, the place of residence of the principal would be the foreign jurisdiction of the agent.

This can have a significant impact on the VAT treatment, as under Article 29 for instance the place of supply of services generally is the place of residence of the supplier, which would be the foreign jurisdiction in this case.

Taxpayers using agency arrangements will need to carefully consider the impact of the changing residence requirements on their VAT position. In particular, principals will need to verify the place where the agent is established or has a fixed establishment in order to correctly identify the VAT implications of their transactions.


The amendments to the period during which the FTA can open a tax audit should be a timely reminder to ensure that VAT filings are correct. Given the significant increase in the window for the FTA to open a tax audit, a review of historical filings should be considered to ensure that any corrections can be made within the five-year window.

The requirement to issues tax invoices within 14 days, extending invoice requirements to periodic supplies and new zero-rated supplies, will require taxpayers to carefully review the changes made by the VAT Amendment Law to ensure that they can adapt their systems and processes to ensure they are operating in accordance with the law.

The amended provisions relating to principals/agents, and the restriction of the domestic reverse charge to pure hydrocarbons, may affect fewer taxpayers but, where relevant, could have a significant impact. Therefore, affected taxpayers should ensure they clearly understand the impact of the amended rules on their VAT liabilities.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Parwin Dina is Global Tax Leader, Global Tax Services. The comments in this article are for general information and are not intended as advice. Readers should seek professional advice where relevant.

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