Dubai has rolled out extensive reforms in its Value Added Tax, which will significantly affect most sectors of businesses. In fact, the reforms have been provided for in Cabinet Decision No. (100) of 2024 on the Executive Regulation of VAT. The efforts by Dubai at refining their regulatory framework to adapt to new economic needs are demonstrated in these reforms. Here’s what businesses have to know about these essential VAT updates in Dubai and UAE.
Overview of the Amended Executive Regulation for the Value-Added Tax
On October 2, 2024, the UAE Federal Tax Authority (FTA) published Cabinet Decision No. (100) of 2024, updating Federal Decree-Law No. (8) of 2017 on VAT tax Dubai. Included in the “Updated Executive Regulation” are over 30 changes to be implemented on November 15, 2024, regarding real estate, finances, digital assets, transportation, and much more.
Key Amendments Concerning VAT in Dubai
- Inclusion of Virtual Assets and VAT on Crypto Currency in UAE
The updated regulation introduces virtual assets, defining them as Digital representation of value that can be digitally traded or converted and can be used for investment purposes except for digital representations of fiat currencies or financial securities. Transfer of ownership of virtual assets such as cryptocurrency including exchange of virtual assets is now brought within the ambit of financial services.
With increased acceptance and use of virtual assets such as Crypto currencies this amendment has a significant impact. It also reflects Dubai’s proactive approach to regulating virtual assets and increasing transparency its trade by giving it a special status within VAT Dubai.
- Expanded Scope for Supply of Real Estate
Article 2 now broadens the scope of real estate supply, in addition to the sale and tenancy contracts, to include any other disposal that could lead to a transfer of ownership between different persons. This changed means supplies relating to real estate must now be closely monitored as to ensure compliance with VAT compliance and to understand how VAT Dubai UAE affects their operations.
- Tax Treatment on Deemed Supplies
Article 5 introduces an AED 250,000 exception threshold for output tax on deemed supplies where the supplies are made by government bodies and charities and the recipients are also government bodies and charities. Transactions exceeding this threshold are taxable, streamlining tax reporting for Dubai’s public and charitable sectors.
VAT Registration and Deregistration
- Voluntary Registration Requirements
Article 8 outlining the voluntary VAT registration requirements has been amended enabling businesses making Out of Scope supplies eligible to register for VAT on voluntary basis. The change further mandates businesses to provide evidence of their intent to make supplies in Dubai. This is critical for businesses looking to register for VAT in Dubai, as the documentation supporting their intent is now essential.It is important for companies to seek advice from approved VAT consultants in Dubai so that they understand clearly the provisions of VAT regulations in Dubai.
- VAT Deregistration
Article 14 now reaffirms the power of FTA to deregister businesses if their registration is deemed prejudicial to the integrity of tax system. Article 15 further mandates removing entities from VAT groups if they are no longer making taxable supplies. Businesses should regularly assess their VAT group status to understand the whether continuation of the tax group is in compliance with VAT in Dubai..
Zero Rating and International Transactions
- Documentation for Export Goods
The amended Article 30 now brings clarity on the type of documentations required for export transactions in order to be eligible zero-rated VAT. The amendment has now introduced alternative set of documents that can be used as evidence including, but not limited to, customs declarations, shipment certificates, and other official and commercial evidences. This change, apart from enhancing the regulatory clarity,is beneficial to Dubai-based businesses to maintain compliance under VAT in Dubai. It is essential for VAT accountants in Dubai to be aware about these changes.
- Transportation Services
The amendment to Article 33 has now clarified that the transport of goods from a place in the UAE to another place in UAE, as part of international transportation of goods, should be supplied by the same suppliers in order to qualify for zero-rating. It is now crucial for businesses in this sector to revisit their current tax treatment to ensure compliance with VAT in Dubai.
Input Tax Recovery and Compliance Changes
- Input Tax Recovery on Employee Entitlements
- Article 53 has been amended to enable business to recover input VAT paid on medical insurance provided to its employees and their dependents. However this is subject to the legal obligations under the applicable labor law in each Emirate and designated zones
- Profit Margin Scheme
- Article 29 has been redefined whereby it is clarified for the purpose of calculating the profit margin, the purchase price shall include in addition to the price of the goods, any other cost and fee incurred for purchasing the goods. Businesses availing Profit Margin Scheme must evaluate their exposure to ensure compliance with VAT in Dubai.
- Invoicing requirements
- Article 59 has been amended to bring in stricter rules for date of issuance of tax invoces in the following scenarios:
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- Simplified tax invoices should be issued at the date of supply
- Summary tax invoices should be issued and delivered within 14 days from the end of the calendar month that includes the date of supply of these supplies.
Impact of VAT Changes on Businesses in Dubai
These VAT updates impact various industries across Dubai, including real estate, digital assets, and international trade. The changes aim to reduce compliance burdens, clarify regulatory requirements, and align Dubai VAT rate laws with international standards. For businesses in Dubai, understanding these updates is essential for seamless integration into their operations.
Navigating VAT services Dubai can be complex with ongoing regulatory changes.
As an FTA approved tax agent, JAXA Chartered Accountants offers expert guidance on VAT compliance, audit, and corporate tax strategies in Dubai. Our team is experienced with the latest VAT amendments, ensuring businesses in Dubai stay compliant and avoid penalties.
Contact JAXA Chartered Accountants today to speak with our VAT specialists on how we can support your business in adapting to the latest VAT changes. Let us help you stay compliant, minimize tax risks, and focus on growing in Dubai’s dynamic market.
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