The UAE Federal Tax Authority (FTA) has implemented a comprehensive overhaul of the UAE VAT Executive Regulations through Cabinet Decision 100 of 2024 amending Cabinet Decision No. 52 of 2017, which brings significant changes to the way VAT is applied and managed within the country. These changes are effective from 15th November 2024.

Here is a summary of the key updates:

Digital Assets & Financial Services:

The definition of exempt financial services now includes digital assets, such as cryptocurrencies, effective from January 1, 2018. This move clarifies the previously uncertain VAT treatment of digital assets. Additionally, investment fund management services are now recognized as exempt, marking a shift from the previous 5% VAT.

Input VAT Apportionment:

The FTA can now formally require taxpayers to apply for a special Input VAT apportionment method if the default method does not provide a fair and reasonable attribution. Taxpayers can also request FTA approval for a fixed apportionment percentage based on the previous year’s ratio.

Medical Insurance:

VAT recovery is now permitted on health insurance for employees, their spouse, and dependents within the limits of one spouse and three children under the age of eighteen.

Export of Goods:

Updated provisions for retaining official and commercial evidence for exports aim to ease the process for businesses applying the zero rate on exports.

Export of Services:

Additional requirements to zero rate export of services. Supply should not fall under any special place of supply rules.

Composite Supplies:

Clarification provided for the tax treatment of composite supplies without a principal component.

Other Notable Changes include expanded definitions of goods to include real estate transactions, clarifications on residential buildings, adjustments under the Capital Assets Scheme, and new requirements for the issuance of Tax Invoices and Tax Credit Notes.