Reverse Charge Mechanism on Precious Metals and Precious Stones
Cabinet Decision No. 127 of 2024
Effective Date: 15 February 2025
What's Changing:
- VAT Reporting Shift:
- The decision introduces a reverse charge mechanism for supplies of precious metals (diamonds, pearls, rubies, sapphires, emeralds) precious stones, and jewellery predominantly made of these elements.
- Under this mechanism, suppliers are not responsible for accounting for VAT on these supplies—the responsibility shifts to the recipient.
- Mandatory Pre-Supply Declarations:
- Recipients must provide written declarations confirming their registration status and that the goods will be resold or used in production.
- Suppliers must verify and keep these declarations on file.
Who Should Pay Attention:
- Traders and Suppliers of Precious Goods: Businesses involved in the supply of precious metals, stones, or related jewellery must adjust their VAT processes.
- Recipients/Manufacturers: Entities purchasing these goods must be prepared to account for VAT and ensure that all required declarations are in place.
Action Points:
- Update VAT Procedures: Shift internal processes so that VAT accounting is transferred to the recipient when the conditions are met.
- Strengthen Documentation: Ensure all transactions are supported by the mandatory written declarations and verify the registration status of trading partners.
Extension of Deadlines for Tax Assessment Review Requests
Federal Tax Authority Decision No. 1 of
2025
Effective Date: 1 March 2025
What's Changing:
- Extended Submission Deadlines:
- Taxpayers can now request extensions for submitting tax assessment review requests or requests for reconsideration.
- Valid Extension Grounds:
- Extensions may be granted if delays are due to serious illness, accidents, the death of key personnel, business disruptions, system malfunctions, or disasters.
- Clear Rejection Criteria:
- Requests will be rejected if delays result from negligence, lack of awareness of obligations, or third-party errors.
Who Should Pay Attention:
- All Taxpayers: Particularly those who may face unexpected disruptions or emergencies that could affect their ability to meet tax deadlines.
- Tax Advisors: Must be aware of the acceptable and non-acceptable grounds for extensions to guide clients accurately.
Action Points:
- Document Hardships: Keep detailed records and documentary evidence if an extension is needed.
- Monitor Deadlines: Be proactive in identifying potential delays and communicate with the tax authority early.
Issuance of Clarifications, Directives, and Input Tax Apportionment
Federal Tax Authority Decision No. 2 of
2025
Effective Date: 1 March 2025
What's Changing:
- Clarification Process:
- A formal framework is now in place for issuing both private and public clarifications and directives on tax matters.
- These clarifications will be binding on the Authority for the specific taxpayer or tax group concerned.
- Input Tax Apportionment:
- Taxpayers can apply for alternative methods to calculate recoverable input tax if the standard mechanism does not produce fair outcomes.
- Advance Pricing Agreements:
- The decision paves the way for applications related to advance pricing agreements, with specific timelines set for submissions.
Who Should Pay Attention:
- Businesses with Complex Tax Situations: Especially those with mixed taxable and non-taxable activities that require alternative input tax recovery methods.
- Tax Departments & Advisors: Entities seeking tailored clarifications on ambiguous tax matters must understand the updated procedures.
Action Points:
- Prepare Comprehensive Requests: When seeking clarifications or input tax apportionment decisions, ensure all necessary documentation and supporting evidence are provided.
- Stay Informed: Regularly review guidance from the Federal Tax Authority to ensure internal policies are aligned with the new framework.
Formation and Operation of Tax Groups
Ministerial Decision No. 301 of 2024
Effective Date: 10 December 2024
What's Changing:
- Enhanced Group Formation Rules:
- The decision refines the definitions of "Parent Company" and "Subsidiary" and mandates that both must be UAE tax residents.
- It establishes continuous ownership requirements throughout the tax period.
- Pre-Grouping Transactions & Losses:
- Transactions that occurred before forming or joining a Tax Group will continue to affect taxable income until any previously claimed tax losses are reversed.
- Financial Reporting & Restructuring:
- In the event a subsidiary leaves the group, it must prepare standalone financial statements using the group's accounting methods.
- Special provisions apply to business restructuring within the group to ensure smooth transitions.
Who Should Pay Attention:
- Corporate Groups & Multinationals: Entities that operate multiple companies under a common ownership structure must review their group formations and intra-group transactions.
- Finance Departments: Ensure that documentation supports continuous compliance with residency and ownership rules.
Action Points:
- Review Internal Policies: Update procedures to ensure that all group members meet the new requirements continuously.
- Maintain Detailed Records: Document all pre-grouping transactions and losses meticulously to support tax filings.
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.
