Dubai VAT and Corporate Tax Changes in 2023: Recent Taxation Rules

 The Dubai government has introduced multiple changes in the Dubai tax procedures for 2022. The year 2023 is expected to be a landmark for implementing new tax and VAT procedures in Dubai.

 UAE, December 22, 2022 – Dubai government has introduced multiple changes for tax and VAT procedures in 2022 and is now all set to implement major amendments effective from 2023. The primary aim was to support the business sector by facilitating tax payment processes. Companies will have to exercise the best accounting and auditing practices in order to adhere to the new tax and VAT laws. The best accounting services in Dubai can help you prepare your book of accounts, conduct an accurate audit, and comply with tax policies.

 H.H. Sheikh Mohamed Bin Zayed Al Nahyan the President of the UAE has announced the Federal Decree-Law No.18 of 2022 modifying some crucial provisions in regard to the tax and VAT in Dubai. New rules and laws are aimed at retaining existing businesses and attracting new potential investors to the country. Following the initiative, on 28 October, the Ministry of Finance announced changes to certain provisions of the UAE VAT. In this update, 24 modifications have been made and published in the official gazette. The amendments will take effect from 1 January 2023.

 The major changes in the Excise Tax Decree-Law include the statute of limitations, exception from registration, payment of excise tax amount received, and the timeframe for submission of voluntary disclosure.

 Effective on October 14, 2022, under the Federal Decree-Law No 7 of 2017 on Excise Tax, the Dubai government announces an exception from excise tax registration. The latest amendment reflects that an investor involved in importing goods for purposes other than operating business shall be exempted from tax registration.

 Another crucial change reflects that a person who either issues an invoice or collects an excise tax amount is obliged to settle such an amount to the FTA. Another change in tax clarifies the time limit for the submission of voluntary disclosure by a taxable person. The person should not take any longer than 5 years from the completion of the relevant tax period.

 An extended time frame for a tax audit is another benefit for investors. A tax audit of a company for a quarterly or monthly tenure is not supposed to be conducted after the termination of 5 years from the end of such tax period. Nevertheless, you can conduct an actual audit during the next 4 years if you are notified of a tax audit commencement within 5 years.

 Tax evasion – a tax audit possibly be carried out in case of tax evasion within 15 years after the end of the tax period in which the evasion occurred. The term "tax evasion" refers to when a person involves in an illegal service, whether or not they are registered, subsequently resulting in the declined amount of tax due, or gaining a tax refund for which they would not otherwise be qualified.

 “Latest tax changes are aligned with the best globally recognized tax practices and standards. The government made sure to keep changes in the best interest of the investors. Businesses in Dubai must recognize, evaluate, and imbibe the recent tax and VAT laws and understand the implications of the latest changes before they come into effect.” Says Jashvant Prajapati CEO Avyanco.

 The UAE Federal Tax Authority (FTA) may conduct an audit of 15 years in a certain condition where an entrepreneur fails to acquire a tax registration. The audit will be conducted from the date on which the business has been registered.

 Another major tax change that happened in 2022 was Dubai introducing a corporate tax. It has been set at a standard statutory tax rate of 9%.

 “Dubai introduces tax regulations to keep pace with the highly rapidly changing economy worldwide. For instance, the government introduces a corporate tax of 9%. However, a 0% tax rate will be applicable on taxable profits up to 375,000 DHs. It is an attempt to support start-ups and small businesses. Economies operating in the fast pace environments must need to review and revise their tax procedures and laws.” Jashvant Prajapati CEO of Avyanco further says.

 Furthermore, in accordance with the new VAT laws, a business shall not hold responsible for a VAT liability on free-of-cost (FOC) products or services to mutual associates in case the recipient firm is held accountable to recover 100% input credit on its purchases.

 Zero-Rated businesses will have the option to apply for a VAT registration exemption since the law is not to burden the investors but to support them to grow uninterruptedly. Additionally, the already VAT-registered companies shall also apply for the VAT exemption as per the new regulation which will be effective on January 2023.

 As per new VAT law updates by the federal government, the maximum amount of administrative penalties will be limited to 200% of the total tax amount which was previously 300% for delay in payment of tax.

 The new tax rules also issue additional compliance for input credit on the import of services. In accordance with the latest updates in the VAT laws, for businesses involved in importing services from overseas service providers, input credit will only be recovered if the taxpayer acquires and preserves invoices as in some cases service providers do not issue invoices.

 Another new rule has been recently announced by the Ministry of Finance. It announces that board members across institutions in the UAE will not be subject to VAT effective from January 2023. However, the VAT tax would still be applicable for legal personnel who have appointed a board member to act on behalf of those personnel.

 Avyanco as the leading business advisor ensures providing you with top-notch consultancy and guidance on how you can comply with the latest tax rules. We aspire to bring world-class service and high-class capabilities to help you align your business models as per the latest compliance requirements within the country.

 About Avyanco

Avyanco is the leading business and tax cons

ultancy firm working actively across Dubai and the UAE. We can advise you on every aspect of your business from setting up a company to getting the license to make financial policies to comply with the tax rules and regulations. With our positive and unique approaches, you can not only meet the required VAT and tax standards but run your business without any obstacles.