If you need a guideline to vat compliance for e-commerce in the UAE then you’ll be happy to know that earlier this week (august 2020), the United Arab Emirates’ Federal Tax Authority released its new guide on how to navigate VAT compliance around e-commerce and digital services.
The VAT guide (VATGEC1) goes through all the relevant criteria that both local UAE businesses and foreign businesses need to understand to determine whether they need to register and account for VAT. It also highlights what the UAE considers as an electronic service and confirms how to determine the place of supply.
Who needs to understand the UAE’s eCommerce VAT Guide
This guide should be read by both resident UAE businesses and non-resident businesses involved in the eCommerce and digital services sector as it outlines the VAT compliance criteria for this industry specifically.
The UAE’s VAT registration requirements within the eCommerce Sector
A business may require a mandatory vat registration or voluntary VAT registration:
Mandatory VAT Registrations
A person resident in the UAE is required to register for VAT if any of the following apply:
- the total value of their taxable supplies made within the UAE and imports into the UAE exceeded AED 375,000 over the previous 12-month period; or
- the person anticipates that the total value of their taxable supplies made within the UAE and imports into the UAE will exceed AED 375,000 in the next 30 days.
The main categories of supplies and imports that need to be taken into account for the purposes of the mandatory registration threshold, and the voluntary registration threshold (discussed in Part 2.4.2 below), are:
- Supplies of goods or services made in the UAE in the course of business.
- Any goods or services that the person has imported into the UAE that would have been subject to VAT had they been supplied in the UAE.
The person should not include in this calculation the value of any supplies which are either exempt from VAT or are outside the scope of UAE VAT.
In contrast, if the person is not resident in the UAE, the person is required to register for VAT if it makes any taxable supplies in the UAE. However, the exception if another person in the UAE is responsible for accounting for VAT on such activities. As such, for non-resident suppliers, the registration threshold is, in effect, nil.
Voluntary registration is an option available to businesses which do not have a turnover in excess of the mandatory registration threshold but would still like to be registered for VAT.
A person can voluntarily register for VAT if
- at the end of any month, the total value of the person’s taxable supplies and imports, or their expenses which were subject to VAT, in the previous 12 months exceeded AED 187,500; or
- the total value of the person’s taxable supplies and imports, or their expenses which are subject to VAT, is expected to exceed AED 187,500 in the next 30 days.
It should be noted that a non-resident person is not allowed to voluntarily register on the basis of its “taxable expenses”.
What does the UAE consider as an electronic or digital service?
For the purposes of VAT, “electronic services” mean services which are automatically delivered over the internet, an electronic network, or an electronic marketplace, including the supply of:
- domain names, web-hosting and remote maintenance of programs and equipment;
- Software (SaaS);
- images, text, and information provided electronically, such as photos, screensavers, electronic books and other digitised documents and files;
- music, films and games on demand;
- online magazines;
- advertising space on a website and any rights associated with such advertising;
- political, cultural, artistic, sporting, scientific, educational or entertainment broadcasts, including broadcasts of events;
- live streaming via the internet;
- distance learning;
- services of an equivalent type which have a similar purpose and function.
Vatglobal can offer assistance with any registration, filing & VAT accounting needs you may require in the UAE. To get in touch, email us at firstname.lastname@example.org. Or leave your details on our website and we’ll get back to you.
This article was originally published on our sister company’s website, vatit.com.