Amendment of the UAE VAT Executive Regulations

In detail

Article 3 - Supply of Services

VAT treatment of functions performed by members of a board of directors:

Article 3 of the VAT Executive Regulations introduced a new clause (No.2) stipulating that the functions of a member of a board of directors, performed by a natural person appointed as such, for any government entity or private sector establishment, are no longer considered a supply of services for VAT purposes.

This change in the VAT treatment of functions of a member of a board of directors is effective from 01 January 2023.

The FTA issued Public Clarification VATP031 clarifying certain aspects of the amendment in more detail. 

The Public Clarification clarified that for the provision of directors’ services not to be considered as a supply of services for VAT purposes according to the amended Executive Regulations, the following conditions must be met:

• The services are provided by a natural person - This amendment does not extend to a legal person, whether private or public, who may delegate in its own name a natural person to act as Director.

• The person is appointed as a director on a Board of any government entity or private sector establishment - Other services provided by the member are considered to be supplies of services for VAT purposes and may be taxable.

The Public Clarification lists transitional rules for the change in the VAT treatment of functions performed by members of a board of directors for the period both prior to and from 01 January 2023.

Article 72 - Record Keeping of the Supplies Made

Introduction of new record keeping requirements for taxable supplies made through electronic commerce

The new Cabinet Decision amended the provisions of Article 72 of the VAT Executive Regulations to introduce specific record keeping requirements for taxable supplies made through electronic commerce.

The amendment to Article 72 introduced:

• a definition for electronic commerce, 

• a threshold of which taxpayers would be required to apply the record keeping mechanism, and 

• a specific time period to comply with the amendments.

Electronic commerce definition

• As per clause 5 of Article 72, electronic commerce refers to the process of selling goods or services through electronic means, an electronic platform, a store in social media, or electronic applications in accordance with criteria and conditions determined by the Minister.

Threshold

• Taxable persons making taxable supplies through electronic commerce are required to keep records of the transaction to prove the Emirate in which the supply is received. 

• The new record keeping requirements applies to taxable persons making taxable supplies through electronic commerce exceeding AED 100 million per calendar year.

Effective start date

The new record keeping requirements shall apply:

• Starting from the first tax period beginning on or after 01 July 2023 and for a period of eighteen (18) months for the taxable person whose taxable supplies made through electronic commerce exceed the AED 100 million threshold during the calendar year ending on 31 December 2022.

• For a period of two (2) years starting from the first tax period of the calendar year that begins after the date of which taxable electronic commerce supplies exceed the AED 100 million threshold.