The UAE VAT Law has been amended through Federal Decree Law No. 16 of 2024 published on September 30, 2024 in the Gazette.
Five articles of the UAE VAT law (Article 1, 55, 65, 70 & 76) have been amended to pave the way for the introduction of e-Invoicing in the UAE. These changes include new definitions and amendments to the existing recovery, issuance and penalty provisions.
This legislative update comes after the UAE Ministry of Finance (MoF) recently published a dedicated section on e-invoicing on their official website.
These amendments to the UAE VAT law serve as yet another reminder for companies to start assessing the impact of the new regime on their operations and review their system & data capabilities to avoid any potential delays and business interruptions.
It is important to point out that failure to implement e-Invoicing correctly should be seen as a core business issue. It goes far beyond the responsibility of the tax department and should be tackled by a variety of stakeholders including, but not limited to, finance, procurement, legal and IT.
Once the e-Invoicing regime goes live, the ability to issue and process e-Invoices will effectively be a critical business continuity requirement for companies in the UAE.
In this alert, we summarize the main changes, which will be effective from October 30, 2024 (30 days from its publication on September 30, 2024).
DEFINITIONS
One of the most notable changes is the introduction of Electronic Invoice, Electronic Credit Note and Electronic Invoicing System definitions under Article 1. This is a significant development as it brings clarity and structure to the meaning and scope of electronic invoicing in the UAE:
- Electronic Invoicing System: An electronic
system dedicated to issuing, sending, exchanging and sharing
invoice and credit note data in accordance with the Tax Procedures
Law.
- Electronic Invoice: An invoice that is issued,
sent and received in a structured electronic format that enables
automated and electronic processing in accordance with the
Electronic Invoicing System.
- Electronic Credit Notice: A credit note that is issued, sent and received in a structured electronic format that enables automated and electronic processing in accordance with the Electronic Invoicing System.
Moreover, the existing definitions of 'Tax Invoice' and 'Tax Credit Note' have been updated to include the above electronic versions.
INPUT TAX RECOVERY CONDITIONS
A new paragraph has been inserted to cater for recovery subject to the retention of Electronic Invoices where they are issued / should have been issued in accordance with the Electronic Invoicing System.
This extension covering proof of incurring tax, although not groundbreaking, removes any ambiguity regarding the recovery rules in the context of electronic invoicing.
TAX INVOICE AND CREDIT NOTE ISSUANCE RULES
The provisions governing issuance of these documents have also been updated to include new paragraphs to oblige taxpayers that are subject to the Electronic Invoicing System to issue Electronic Invoices and Electronic Credit Notes in accordance with that system where applicable.
This amendment ensures taxpayers have a clear understanding of their requirement to issue electronic invoices and credit notes, where applicable.
ADMINISTRATIVE PENALTIES UPDATED
The wording around failure to issue tax invoices and tax credit notes has been updated and the following added 'within the legally prescribed period'. The added wording provides clarity and context to the application of penalties in these cases.
Originally published 30 October 2024
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.