United Arab Emirates Tax Updates December 2021

Goods supplied in a designated zone & connected shipping or delivery services in the UAE

The Federal Tax Authority (‘FTA’) has issued a Public Clarification (VATP027) - Goods Supplied in a Designated Zone and Connected Shipping or Delivery Services on 30 October 2021.

This latest Public Clarification aims to:

Avoid potential double taxation on goods supplied from a designated zone to the UAE mainland; and provide registration relief to non-resident suppliers who also ship or deliver these goods.

VAT Public Clarification on Mobile Phones, Data Packages and Airtime Made Available to Employees for Business Use

A business is entitled to recover input tax in respect of Phones, Airtime, and Packages acquired if these costs are incurred to make taxable supplies and specific requirements as to the name, documented policy, tax invoice etc. are met.

Amendment of Tax Procedures law.

The UAE Cabinet has issued Federal Decree-Law No. 28 of 2021 (16 September 2021), amending Federal Decree-Law on Tax Procedures No. 7 of 2017 (11 June 2017) (The Federal Decree-Law on Tax Procedures). The amendments are effective from 1 November 2021.

Major points are as follows.

Any decisions issued before effective date shall follow old tax procedures law.

The time limits for filing reconsideration applications, objections before the Federal Tax Authorities (FTA), Tax Dispute Resolution Committee (TDRC), and appeals before Competent Courts have been increased from 20 to 40 business days.

An alternate mechanism for filing objections and appeals to be prescribed for federal and local government entities in tax disputes for which the Cabinet shall – according to a suggestion by the Minister – issue a respective decision.

Increase in the time limits for filing tax applications/objections and softening the requirement to pre-deposit only tax amounts for filing objections before TDRC and 50% of penalties at the time of appeal before the Competent Courts

Annual Economic Substance Regulation(‘ESR’) Reporting and Country by Country Reporting

Entities conducting relevant activity & earning income from the relevant activity (provided not an exempted licensee) needs to submit the ESR Report by 31st Dec 2021 for FY ended 31st Dec 2020. For Entities conducting relevant activity for FY ended 30th June 2021 needs to be submit ESR notification by 31st Dec 2021.

Country by Country Reporting is required to be done by Ultimate Parent Entity of the MNE Group whose Tax residence is in the UAE. Reporting needs to be done by 31st Dec 2021 for the Fiscal year ended 31st Dec 2020.

New UAE Labour Law coming into force on 2 February 2022

The Ministry of Human Resources & Emiratisation (“MOHRE”) has announced an overhaul to the labour laws in the UAE. The new UAE Labour Law (Federal Decree Law No. 33 of 2021) (“New Law”), which will come into effect as of 2 February 2022 (“Effective Date”), seeks to address changes in the work environment, align UAE labour relations with international best practices, and recognise the need for atypical and/or flexible working structures.

The New Law will replace Federal Law No. 8 of 1980, as amended (“Current Law”) in its entirety, and it is the most significant amendment to UAE labour legislation since the Current Law’s enactment.

Corporate Tax