On 3 November 2023, the UAE introduced the new Ministerial Decision 265 of 2023, to replace the previous Ministerial Decision 139 of 2023, which came into effect from June 1, 2023. This change offers relief for traders operating in non-designated free zones, such as global entities established in DMCC.

Ministerial Decision No. 265 lists the trading of Qualifying Commodities as a Qualifying Activity, for 0 per cent corporate tax rate for income generated from physical trading of various commodities on recognized stock exchanges. It also covers derivative trading income used for risk hedging in such trading activities.

Furthermore, the Ministerial Decision provides clarity on the scope of Qualifying and Excluded Activities, offering transparency to free zone businesses.

‘Trading of Qualifying Commodities’
Trading of Qualifying Commodities refers to the physical trading of qualifying commodities and associated derivative trading used to hedge against the risks involved in these activities.  Qualifying Commodities include: metals, minerals, energy, and agricultural commodities traded in their unprocessed form on a Recognized Commodities Exchange Market.

The Ministry of Finance has announced the issuance of Cabinet Resolution 91 of 2023 regarding the Application of the Reverse charge mechanism on Electronic Devices among Registered businesses in UAE under UAE VAT.

• The supply of Electronic Devices to a registered business for the purpose of resale or production/ manufacture of other Electronic Devices shall be subject to a reverse charge mechanism.
• The recipient will have to account for VAT on the value of such supplies.
• Electronic Devices are defined as mobile phones, smartphones, computers, tablets and their parts and components. Under this mechanism, the responsibility for VAT on electronic device supplies (for example, mobile phones, smartphones, computer devices, tablets, and related parts) will shift from the supplier to the recipient if these items are intended for resale or use in electronic device manufacturing.
• In the clarification issued on Wednesday, the FTA outlined the goods covered by the Decision – ‘mobile phones and smartphones’ – which include phones and devices that only have call and/or text functions and those that include additional functions. It applies only to phones and devices that operate through wireless transmission.
• The Cabinet Decision includes all types of computers, such as: personal computers, desktop computers, minicomputers, analogue, digital, hybrid computers, servers, computerised engine control units (ECU) for cars, and other similar devices.
• It excludes: phones and devices running through physical means, such as wire or fibre optic cables.
• The registered recipient will calculate and report VAT on these supplies in their Tax Returns, along with fulfilling relevant tax obligations, FTA said on Wednesday.

The Cabinet Resolution specifies certain conditions and documentation required to be maintained for both the supplier and the recipient:

The FTA  clarified that a Decision will be released to specify the standards to be followed while defining the parts and components of Electronic Devices.

The Cabinet Resolution is applicable after 60 days from the date of publication in the Official Gazette.

Summary

**1. ** Background Check: 

Understand Cabinet Decision No. 91 of 2023. 
Shift in VAT responsibility: supplier to buyer. 
Vital for electronic device businesses. 

**2. ** Scope Clarified: 

Intention to resell or use devices in manufacturing. 
Definition of ‘Resell’: Active trading, wholesale, or retail. 
Excludes consumption for business purposes. 
**3. ** Device Diversity: 

What qualifies as ‘Electronic Devices’? 
Mobile phones, tablets, computers, and components. 
Excludes physically wired devices. 
**4. ** Compliance Checklist: 

Supplier and buyer requirements. 
Buyer declarations: intent and VAT registration. 
Implications of non-compliance. 

**5. ** Zoning Matters: 

Impact of designated zones. 
Goods movement within UAE and designated zones. 
Crucial for businesses in these zones. 

**6. ** Effective Date Alert: 

Cabinet Decision in effect from October 30, 2023. 
Key date for compliance and transactions. 
Stay compliant to avoid penalties. 

**7. ** Action Steps: 

Review electronic device operations. 
Ensure compliance with Cabinet Decision No. 91. 
Communication with suppliers and buyers. 
Stay updated with FTA guidelines. 
Seek professional advice for specific concerns. 

**8. ** Document Checklist: 

Cabinet Decision 91 of 2023. 
Ministerial Decision 26 of 2023. 
VAT Public Clarification VAT P034. 

The UAE has previously implemented a similar mechanism for other key sectors like gold/ diamond trade and oil/gas trade between registered businesses. The high value and volume of such transactions undertaken means that the reverse charge mechanism will help Electronic Device traders to better manage their cashflows and account for VAT.

The UAE Ministry of Finance recently issued an Explanatory Guide for Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (the “Corporate Tax Law”. The Guide provides detailed explanation of each article, the intended purpose of the provisions of the Corporate Tax Law and the executive decisions issued for its implementation.

The Guide explains the policies related to the Corporate Tax regime in the State, based on which the provisions of the Corporate Tax Law were formulated.

FINAL-CT-Guide-English-12.5.23.pdf (mof.gov.ae)

The Guide will assist in understanding the legal provisions and improve the Corporate Tax Law’s readability by companies, businesses and individuals undertaking a business or business activity.

The Guide may be referred to when interpreting the provisions of the Corporate Tax Law and shall be used as a reference guide to understand the provisions and scope of application of the Corporate Tax Law and assist businesses in understanding the tax rules, conditions and obligations through providing some examples that are intended to simplify tax terminologies.

The Explanatory Guide must be read in conjunction with the Corporate Tax Law and the relevant decisions issued by the Cabinet, the Ministry of Finance, and the Federal Tax Authority for the purposes of applying some provisions of the Corporate Tax Law. The Guide is not, and is not meant to be, a comprehensive description of the Corporate Tax Law and its implementing decisions. The latest version of the Guide will be made available on the website of the Ministry of Finance as well as the website of the Federal Tax Authority.

There are helpful FAQs here: Corporate Tax​ FAQ – Ministry of Finance – United Arab Emirates (mof.gov.ae)

The UAE’s Federal Tax Authority (FTA) has launched the tax registration for public joint stock companies and private companies to start from Monday, May 15th. Registration will be available through the EmaraTax digital tax services platform. The FTA will send invitations to register using EmaraTax to these chosen organizations via email and SMS. 

Taxable people must register and obtain a tax registration number for corporate tax purposes. The FTA noted that this round will not yet cover free zone people, adding that further announcements will be made when registration opens to them at a later stage.

Taxable people will be subject to corporate tax from the financial year that begins on or after June 1st, 2023. When registration opens, the FTA said the authorities will provide firms and companies enough time to register and comply with legal requirements. Priority will be given to organizations and corporations whose fiscal year begins on June 1st

The Federal Tax Authority (FTA) published Decision 4 of 2022 for ‘Setting the Time Limit for Tourists to Claim Refund of VAT’. Tourists have a time limit of one year from the date of verification of the refund request to claim their VAT refund by bank card or in cash. The operator of the Tax Refunds for Tourist Scheme is required to deposit the unclaimed money to FTA within one month of expiration of time limit if the tourist fails to claim the VAT refund within that time.

FTA calls tax registrants to benefit from the extension of the grace period for the re-determination of administrative penalties on violating tax law until December 31, 2022.Tax registrants who were not able to benefit from redetermination by December 31, 2021, can now benefit from the one-year extension.

The decision has been taken by the Cabinet in line with the wise leadership’s directives to reduce burdens on business sectors and enhance their abilities to contribute more to the growth of the national economy. The decision is also a part of the FTA’s goal to provide a legislative environment that encourages a high level of tax compliance.

Tourists outside the EU will be required to submit a photograph and fingerprints from May 2023 as part of the bloc’s bid to tighten entry rules. Non-EU travellers will be asked to submit photos and four fingerprints, which will be submitted in the form of biometric data.

This will also register the traveller’s name, travel documents and date and place of entry and exit.

The EU Commission’s spokesman said: “Stamping is time consuming, does not provide reliable data on border crossings and does not allow the detection of overstayers or address cases of loss or destruction of travelling documents.”

The EU’s long delayed Entry/Exit system (EES) will come into force in May, and will replace the stamping of passports. The “Etias” scheme was initiated before the UK’s vote to leave the Brussels bloc and mirrors the US “Esta” scheme.

Prospective visitors will be forced to complete an online form with details of health, education and any criminal convictions, and pay €7 (£6) for a three-year permit.

“There is no such thing as an e-gate for a car, and there is no such thing as an e-gate process for people travelling as a group. They’re all one-at-a-time processes.”

(for UK citizens note: Passport stamping has been a requirement for UK nationals entering and departing countries in the EU since Brexit.

Update:

The EU recently said that the introduction of the a new entry visa has been pushed back until the end of 2023. It comes as the introduction of a new European Travel Information and Authorisation System (Etias) from May 2023 has been put back until November.

Eurostar, Eurotunnel and the Port of Dover have expressed concern about the need for every traveller to be fingerprinted and provide a facial biometric. If every departing ferry or Eurotunnel passenger at Dover or Folkestone has to be checked in person, the present infrastructure could not cope.

However, the EU’s long-delayed Entry/Exit system (EES ) is still due to come into force in May and risks catching out summer tourists. The system requires the registration of non-EU travellers’ photos and fingerprints, which will be submitted in the form of biometric data. It will also register the name, travel documents and date and place of entry and exit.

The commission said the system would replace the stamping of passports.