United Arab Emirates Tax Updates March 2022

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

The UAE Federal Tax Authority (“FTA”) published a new VAT Public Clarification (VATP028) to provide guidance on the input VAT recoverability related to mobile phones, airtime, and data packages that are made available to employees for business use by their employers.

The Public Clarification inter-alia clarifies that a business is entitled to recover input VAT from mobile phone usage if these costs are incurred to make taxable supplies and all the following conditions are met:

The business is registered for VAT and has purchased Phones, Airtime, and Packages in its own name (Not in Employees name)
The business has a detailed documented policy which clearly states that the Phones, Airtime, and Packages may only be used for business purposes, and shall also specify the consequences of any personal use.
The business regularly monitors the use of Airtime and Packages and retains explanation for the variances
The business takes action against employees using Phones, Airtime, and Packages for personal use.
The business shall obtain and maintain the tax invoice received from supplier against their services
United Arab Emirates – Niger Tax Treaty comes into effect:

The 2018 Tax treaty between UAE and Niger entered into force on 18 August 2021 and will apply as from 1 January 2022. When in effect, the treaty provides that dividends and interest will be taxable only in the state of residence of the recipient. A 10% rate will apply to royalties.

UAE issues new Federal Electronic Transactions and Trust Services Law

The UAE has issued Federal Decree by Law No. 46 of 2021 on Electronic Transactions and Trust Services (“Law”). It introduces legal concepts into UAE law that are similar to the European eIDAS Regulation to promote legal certainty in electronic interactions.

The Law provides a new means for regulating Electronic Identification Systems and Trust Services.

Electronic identification allows businesses and consumers to identify and authenticate who they are. Under the Law, The Telecommunications and Digital Government Regulatory Authority (‘TDRA’) is to issue the rules, procedures and standards related to the electronic identification systems, verification procedures and digital ID, after coordination with concerned bodies.

Trust Services are electronic services which aim to improve the confidence of citizens and businesses in the security and certainty of electronic transactions.

The Law repeals the existing Federal Law No. 1 of 2006 concerning e-transactions and e-commerce (“Old Law”) as of 2 January 2022. However, there is a 12-month grace period which allows those subject to the Law to ensure that they are compliant.

Federal Decree No. 32 of 2021 concerning Commercial Companies comes into force from 02 January 2022

The United Arab Emirates government published the Federal Decree No.32 of 2021 concerning Commercial Companies (CCL 2021) which comes into force from 02 January 2022, on which date the Federal Decree Law No. 2 of 2015 and its amendments (CCL 2020) will be repealed.

The CCL 2021 incorporates changes that will affect (in a positive way) the present operations of companies, and investors that wish to establish business presence in the UAE.

Companies incorporated at the date of commencement of the CCL i.e. January 2022, will be permitted a period of 12 months from that date to amend their memorandum and articles of associations, such that they are not inconsistent with the provisions of the CCL 2021. Failure to do so can result in a company’s liquidation and exposure to fines that may be prescribed by Cabinet in this regard.

Corporate Tax