January 1, 2023, won’t be just in the news hype for the New Year celebrations; it would be in the news because the date is going to be a milestone for UAE’s Value Added Tax (VAT) system. 1st January 2023 is going to represent the completion of a 5-years tax regime in the country, and everyone is going to witness the rollout of a new era of VAT laws after some significant changes. Wondering what the changes are going to be about? Dive in to find out!
#1 Augmented Tax Audit deadline
This change is for good! Typically, monthly/quarterly period tax audits cannot be conducted after the expiration of 5 years from the end of the tax period. But, now, if the taxpayer has received notice that a tax audit is underway within those five years, the actual audit might be carried out and/or finished within the next four years of receiving that notice.
#2 Tax Evasion
Irrespective of whether a person is registered or not, tax evasion signifies the use of illegal methods for avoiding paying their true tax liability. A tax audit may be carried out in cases of tax evasion within 15 years of the end of the tax period when the evasion happened.
#3 Tax Probe After Voluntary Disclosure
The FTA will have an additional year to perform a tax audit if a voluntary disclosure for a monthly or quarterly tax period is submitted in the fifth year following that tax period. In essence, the extra time will make sure that FTA has enough time to process the voluntary disclosure and carry out further audits in response to such disclosures.
#4 Inability for VAT Registration
Most people live with the notion that if they don’t get a VAT registration, they can be off the books for the authorities, and hence they won’t have to pay their taxes. However, if a person does not get a tax registration or fails to obtain one, within the next 15 years from the date where the person was supposed to be registered, the FTA can conduct a tax audit. Therefore, businesses and individuals must start to reevaluate when they are obliged to get their VAT registration.
#5 Glad tidings for 100% exporters
If a company’s whole supply chain is zero-rated, the owners are not required by law to perform routine VAT compliance checks. These companies can ask for a VAT registration exemption. Companies that were already registered for VAT but were unaware of this advantageous option had to keep up with their regular VAT compliances. Businesses that have already registered for VAT may also request an exception after January 1, 2023.
In addition to these five changes, the construction sector and retain payments are also going to evolve along with additional compliance for input credit on the overall import service.
It’s a wrap!
Tax amendments are essential to keep pace with the dynamically evolving economy. Tax authorities are relentlessly working to drive away the tax payer’s concerns. Thus, every enterprise owner must evaluate the implications of the VAT changes that are tentatively coming into effect by 1st January 2023.