“The Federal Tax Authority (FTA) has recently amended Value Added Tax Decree Law (Federal Decree-Law No. 8 of 2017 on Value Added Tax) vide Federal Decree-Law No. 18 of 2022 on Value Added Tax w.e.f. January 01, 2023. The new provisions or amendments have streamlined certain provisions and removed ambiguity on certain interpretations under UAE VAT Law.

The amendments include certain changes which may have an impact on the existing interpretations as well as others which may not have interpretational impact on the current provisions of UAE VAT law but will bring more clarity in the VAT law.  The amendments leading to interpretational changes are primarily in respect of insertion of time limitation for tax audit/ tax assessment by FTA, time limit for filing a Voluntary Disclosure, time limit to raise a tax credit note and a tax invoice in case of continuous supply, place of supply with respect to continuous supply of goods, valuation of deemed supply in case of related parties, clarification on reverse charge for hydrocarbons, etc. These amendments may impact the current VAT positions adopted by the business entities registered under UAE VAT Law.

For ease of reference, we have summarized below the key amendments including our comments from a practical aspect:

Particulars Explanation

Insertion of Statue of Limitation for tax audit/ tax assessment by FTA

[Article 79 bis]

The FTA has provided a statute of limitation for conducting a tax audit/ tax assessment by FTA, which is summarised below:

Situation Time period for conducting a tax audit/ tax assessment by FTA
Tax audit/ tax assessment by FTA for situations other than the ones specifically mentioned Before the expiration of 5 years from the end of relevant Tax period
Notification for commencement of audit has been sent before the expiration of 5 years Within 4 years from the date of the notification
Voluntary Disclosure(VD) is submitted in 5th year from the end of tax period Within 1 year from the date of submission of Voluntary Disclosure
Tax Evasion Within 15 years from the end of the Tax period in which Tax evasion occurred.
Tax Registration failure Within 15 years from the date on which person should have registered.

No Voluntary Disclosure (VD) may be submitted after 5 years from the end of relevant tax period.

PKF Comments:

  • By addition of statute of limitation provisions, FTA has extended the time limit to conduct and complete a tax audit up to 5+4 years from the end of relevant tax period in case tax audit notice is issued before 5 years from the end of relevant tax period. Businesses may expect to receive notices for tax audit by FTA before January 2023 in respect of VAT return submitted for the tax period starting January 2018, so that such notice is issued within the period of limitation of 5 years.
  • Restriction on time limit for VD is being placed, accordingly, businesses are urged to undertake health check reviews in order to assess that the VAT positions were correctly adopted, correct recovery of input VAT is being made, correct documentation is being maintained, etc. amongst other important aspects in relation to being complaint with UAE VAT law that may potentially result in any cases where VD is required to be filed by the businesses.
  • Businesses must also correctly determine the requirement to apply for VAT registration/exception from registration considering that non-VAT registered businesses can now also get audited within 15 years from the date of being required to register.

Time limit to raise a Tax invoice in case of continuous supply and Tax credit note

[Article 26, 62(2), and Article 67(1)]

The FTA has now prescribed a time limit to raise a tax invoice in case of continuous supply and Tax credit note which was not prescribed earlier:

Particulars Explanation
Tax invoice in case of continuous supply of goods or services A tax invoice shall be issued within 14 days from the date of supply.
Tax credit note A tax credit note shall be issued within 14 days from the date on which instances for issuing a tax credit note occurs.

PKF Comments:

On reading of Article 67(1) and Article 26(1) [which prescribes date of supply in case of continuous supply] of the Decree Law in conjunction, the time limit to raise a tax invoice can be comprehended as follows:

Date of Supply Time limit to raise a tax invoice
Date of issuance of tax invoice Not Applicable, as tax invoice is already issued
Due date of payment specified on the tax invoice Not Applicable, as tax invoice is already issued
Date of receipt of payment 14 days from date of receipt of payment
Date of expiration of 1 year from the date when goods/services were provided 12 months plus 14 days from the date of goods/services were provided

Value of Deemed Supply in case of Related Parties

[Article 36]

The value of Deemed Supply between related parties would be equal to ‘market value’ on fulfilling of certain conditions mentioned in Article 36 of Decree Law.

PKF Comments:

  • Prior to the amendment, the valuation for deemed supply made between related parties was also governed by the provisions of Article 37 of Decree Law which stated the value equal to total cost incurred by the Taxable Person to make such Deemed Supply.
  • Article 36 will now override Article 37 for valuation of Deemed Supply in case of related parties.
  • Accordingly, value of Deemed Supply in case of un-related parties would continue to be governed by Article 37 viz. ‘cost price’ whereas that in the case of related parties would be ‘market price’ as per Article 36.
  • It is to be noted that, Deemed Supply provisions for related party transaction will not be applicable even if the related recipient of goods/services receives such goods/services from the related party supplier at below market price provided the said recipient has the right to fully recover input VAT of VAT charged by the related party supplier.

Clarification on the scope of reverse charge for Hydrocarbons and expansion of the scope of Reverse Charge

[Article 48]

The FTA has clarified the scope of tax payable under reverse charge mechanism on ‘any hydrocarbons’ to ‘Pure hydrocarbons’, which has been defined under Article 1 of Decree Law.

PKF Comments:

  • There was an ambiguity in terms of identifying the exact nature of hydrocarbons which would be subject to VAT under reverse charge mechanism.
  • The FTA has now defined ‘pure hydrocarbons’ as ‘any of the various pure compounds of the chemical formula consisting solely of hydrogen and carbon (CxHY).’
  • Accordingly, only pure hydrocarbons would be subject to VAT under reverse charge mechanism and the amended law brings more clarity on this aspect.

Inclusion of certain Import transactions as part of Zero Rating

[Article 45]

The FTA has amended the article on supplies which are subject to zero rate by including certain categories of import of goods or services in the list. The same has been outlined below:

  • Air, sea, and land means of transport for transportation of passengers and goods.
  • Concerned Goods related to the supply of means of transport mentioned above and which are designated for the operation, repair, maintenance, or conversion of these means of transport.
  • Air or sea rescue and assistance aircrafts or vessels.
  • Crude oil and natural gas.
  • Concerned related goods in context to preventive and basic healthcare services.

PKF Comments:

The FTA has clarified that the supply including import of the above transactions would be subject to VAT at zero rate.

Changes with respect to Place of Supply

[Article 27 and Article 30]







The FTA has amended provisions of place of supply with respect to Continuous Supply of Goods.

Particulars Explanation
Continuous Supply of Goods Place of supply in case of continuous supply of goods where the ownership of Goods is transferred inside the UAE, would be UAE.
Transport related services Place of Supply for Transport-related Services shall be where transportation starts.

 PKF Comments:

Additionally, the FTA has specifically included the place of supply of transport related services under Article 30. Please note that the said place of supply rule was already covered in Article 22 of the UAE VAT Executive Regulations.

Documentary requirement on recovery of Input tax in case of import of goods and services

[Article 55]

While the documentation requirement for taxable persons accounting for due VAT on import of concerned goods and services was already covered under Clause 5 of Article 48 of the Executive Regulations, the FTA has now specifically prescribed that input tax on import transactions can only be recovered if the below documents are received, amongst other conditions:

  • In case of import of goods – documents required include invoice and import documents
  • In case of import of services – invoice provided by foreign supplier

PKF Comments:

  • As per provisions of Clause 5 of Article 48 of the Executive Regulations, the taxable person was required to keep the following documents relating to the supply:
    • The supplier’s invoice showing details and the Consideration paid for the Concerned Goods or Concerned Services.
    • In the case of Concerned Goods, a statement from the relevant Customs Department showing details and the value of the Concerned Goods.
  • The amendment introduced under Article 55 of the Decree Law are broadly in lines with the requirements under Executive Regulations mentioned above.
  • FTA has re-emphasized the importance of documentary evidences for recovering input VAT with respect to import of goods or services by specifically including the requirement as part of Decree Law.

Exception from tax registration

[Article 15]

By this amendment, the FTA has clarified that registration exception can be availed by a taxable person who are only making zero rated supplies irrespective of their VAT registration status.

PKF Comments:

  • Earlier, it was not clear whether a VAT registered person can also apply for exception from VAT registration if it is only making zero-rated supplies. The same has been clearly specified now through the amendment made, although procedurally, FTA may have been already allowing this provision earlier as well.
  • However, FTA has reserved its right to collect any due tax & administrative penalties, where it is established that the taxable person was not entitled to this exception.

Clarification on instances for adjustment of output tax

[Article 61(1)]

A registered Person can adjust the output tax after the date of supply in case of certain instances which now also includes application of incorrect treatment of tax.

PKF Comments:

Hitherto, the instance only included if tax was charged in error. By including ‘tax treatment’ the provision now appears broader and clearer.

Recovery of Input Tax by Government Entities and Charities

[Article 57]

Government Entities or Charities specified in applicable Cabinet Decision can recover full amount of Input VAT for the purpose of its sovereign activities and relevant charitable activities, respectively.

PKF Comments:

  • While the erstwhile Article 57 of the Decree Law allowed recovery of full amount of input VAT paid by the approved Government Entities and Charities (i.e., those listed in the respective Cabinet Decision), the amended Article now specifically provides guidance on the input VAT that can be recovered by Government Entities (i.e., can only recover input VAT incurred for undertaking sovereign activities) and by Charities (i.e., can only recover input VAT incurred for undertaking the relevant charitable activity).
  • The above recovery would be subject to specific exclusion of specified instances in the Executive Regulations (say, non-recoverable input VAT as per Article 53 of the Executive Regulation) and input VAT attributable to exempt supplies, which remains the same. (Activities conducted with Sovereign Capacity and Relevant charitable activities are defined under Article 1 of Decree Law)

Place of Residence of Principal

[Article 33]

The Place of Residence of a Principal would be determined based on the Place of residence of its agent in any of the cases specified under Article 33.

PKF Comments:

In our view, the amendment maintains the existing provision and the revised legal text reduces the erstwhile ambiguity.

Widening the base for cases which shall not be considered as supply

[Article 7]

The FTA has widened the base for cases which are not to be considered as supply under UAE VAT Law by including ‘any other category which would be specified in the Executive Regulations’ under the subject provision.

PKF Comments:

Hitherto, only sale or issue of voucher and transfer of going concern business were excluded from ‘supply’ category.  By this amendment, the law has now provided an option to include more instances/ situations, which shall not be considered as supply, through the Executive Regulations.

Changes in relation to Tax deregistration

[Article 21]


  • FTA may issue a decision for deregistration if it is of the view that keeping Registration would prejudice the safety of Tax system.
  • It is stated that VAT deregistration would not impact the Authority’s right to recover any Tax Dues or Administrative Penalties from the person deregistered from UAE VAT law.

PKF Comments:

The amended provisions now give a specific right to the FTA also to de-register a taxable person if it deems fit.

Insertion of definitions

[Article 1]

The FTA has inserted the below mentioned definitions as part of Federal Decree-Law No. 18 of 2022 on Value Added Tax:

  • Relevant Charitable Activity: An activity for the purpose other than profit or benefit to any proprietor, member, or shareholder of the Charity, which is undertaken by the Charity in the course or furtherance of its charitable purposes or objectives to carry out a charitable activity in the State as approved by the competent authorities, or under the conditions of its establishment as a charity under Federal or Emirate legislation, decree or decision, or as otherwise licensed to conduct a charitable activity by an entity that grants such licences on behalf of the Federal or Emirate Government.
  • Pure Hydrocarbons: Any of the various pure compounds of the chemical formula consisting solely of hydrogen and carbon (CxHY).
  • Tax Evasion: The Person’s use of illegal means, resulting in the reduction of the amount of the Due Tax, non-payment thereof, or a refund of Tax that the Person did not have the right to have refunded.
  • Tax Audit: A procedure undertaken by the Authority to inspect the commercial records, or any information, data or goods related to a Person to verify the fulfilment of its obligations in accordance with the provisions of this Decree-Law or the Tax Procedures Law.
  • Tax Assessment: Shall mean the Tax Assessment as defined in the Tax Procedures Law.
  • Voluntary Disclosure: A form prepared by the Authority pursuant to which the Taxpayer notifies the Authority of any error or omission in the Tax Return, Tax Assessment or Tax Refund application in accordance with the provisions of the Tax Procedures Law.
  • Tax Procedures Law: Federal Law No. 7 of 2017 on Tax Procedures and its amendments, and any other Federal law replacing it.

[Source: https://www.tax.gov.ae/en ]

How can PKF help?

  • Businesses in the UAE must imbibe the new VAT regulations and establish for themselves a tailor-made VAT-oriented business system. PKF UAE brings world-class capabilities and high-quality service to clients helping them to align their working model to government reporting and compliance requirements.
  • Our role as tax advisers include:
    • Analyzing the impact of VAT on your business – A complete analysis of the VAT effect on your business helps us provide tailor-made solutions for the financial, operational, and legal aspects of your business.
    • Advising on managing the VAT transaction process – Our expert advice will help your business manage VAT transactions effectively without any room for errors.
    • Invoicing under VAT – We help you to create and manage invoices in accordance with the VAT System.
  • Advising on VAT related compliances as required by UAE VAT Law –
    • Assistance in compiling of information regarding VAT return.
    • Assistance in preparing and filing VAT return.
    • Assistance in communication with the Federal Tax Authority (FTA) for tax related queries and processes (such as refund application, voluntary disclosures) and during tax audits conducted by the FTA.
    • Any other VAT related queries and compliances.
  • With more than four decades of experience, PKF UAE ensures full guidance on how businesses can duly comply with VAT. While the ultimate responsibility and accountability to comply with the law are with the business, PKF UAE can advise at every stage of your business operations. PKF UAE works with an agenda that not only helps your business meet the required VAT standards but also provides inclusive solutions to run the business effectively.



You may email us or can contact any of our team members relating to your queries on this subject:

Stany Pereira
Managing Partner
Shailesh Kumar
Director- Tax Services
Mradul Gupta
Senior Manager
Vidhisha Chhawchharia
Assistant Manager
Megha Lohia
Tax Senior

Disclaimer: This document has been prepared as a general guide. It is not substitute for professional advice. Neither PKF UAE nor its partners or employees accept any responsibility for loss or damage incurred as a result of acting or refraining from acting upon anything contained in or omitted from this document. If you wish to be included on the regular mailing list for this newsletter, forward your request and a mailing address to Ms. Greeta Creado, P O Box 13094, Dubai, UAE. Email: gcreado@pkfuae.com PKF UAE is a member firm of the PKF International Ltd family of legally independent firms and does not accept any responsibility or liability for the actions or inactions on the part of any other individual member or correspondent firm or firms.