Amendments in VAT Decree Law – No. 18 2022

Amendments in VAT Decree Law – No. 18 2022 dtd 28.09.2022

Effective date: 1 January 2023. 

Major changes in simple terms:

1. Definitions – New definitions for Tax Evasion, Tax Audit, Tax Assessment, Voluntary Disclosure etc.
2. Supplies outside the scope of VAT – Executive Regulations may stipulate any other supplies that are explicitly considered outside the scope of VAT.
3. Exception from VAT registration – Allows registered taxable persons to apply for registration exceptions (as a result of making only zero-rated supplies), unlike in the current version of VAT Law, where taxable persons could only apply for such exceptions at the time of registration.
4. Cases of Tax Deregistration – Federal Tax Authority (“FTA”) gets the right to deregister any registered person shall it assume that the taxable person’s valid registration for VAT purposes may cause any harm to the tax system.Further, it has added that the deregistration of taxable persons shall not forfeit the FTA’s right to claim any tax dues or administrative penalties.
5. Date of supply in special cases – Article 26(1) determining the date of supply in special cases includes the date on which one year has passed from the date on which the goods or services are provided, as one of the events to determine the date of supply.
6. Place of supply in special cases – Article 30(8) regarding the place of supply in special cases, now states that the place of supply of transport-related services will be the place where the transportation starts.
7. Place of residence of a principal – Article 33 defines the place of residence of a principal to be the place of residence of the agent. Under the current VAT Law, it was stated that the place of residence of the agent shall be the place of residence of the principal.
8. Value of supply – Article 36 concerning the specific anti-avoidance rule for the value of supply or import of goods and services between related parties will now override Article 37 (value of deemed supply).
9. Goods subject to zero-rate – Additional goods are listed in article 45 (clauses 4, 5 and 6) as subject to zero-rate of VAT. This includes the import of means of transportation, import of goods related to means of transportation and import of rescue planes and ships.
10. Recovery of input VAT – Specifies the requirements for the taxable person to recover VAT paid or declared on the import of goods or services.
11. Recovery of input VAT by Government Entities and Charities – Now the government entities can recover input VAT that is incurred for the provision of sovereign activities. Similarly, charitable organisations can recover input VAT that is incurred for the provision of relevant charitable activities.
12. Output VAT adjustment – Where the taxable person applies an incorrect tax treatment. In such cases, the taxable person should now issue a tax credit note to adjust the output tax.
13. Timeline to issue a tax credit note – The taxable person must issue a tax credit note within 14 days from the date on which any of the instances provided in Article 61(1) occurs.
14. Payment of tax – Article 65(4) makes it mandatory for the taxable person to pay the VAT to the Federal Tax Authority (FTA) in cases where such a person issues a tax invoice stating VAT on it or receives an amount as VAT.
15. Timeline to issue a tax invoice – Article 67(1) specified the date of issuance of tax invoice under Article 26 (date of continuous supply) to be 14 days from the date of the supply.