If you need a guideline to vat compliance for e-commerce in the UAE then you’ll be happy to know that, 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 have to be compelled to understand to determine whether they need to register an 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 e-commerce 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 business 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
(the below is sourced directly from the FTA)
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 created 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 require to be taken into consideration for the purposes of the mandatory registration threshold, and the voluntary registration threshold (discussed in part 2.4.2 below), are:
- Supplies of products or services made in the UAE within the course of business.
- Any product 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 worth of any supplies which are either exempt from VAT or are outside the scope of UAE VAT.
In contrast, if the person is not a 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
Voluntary registration is an option available to businesses that do not have a turnover in excess of the necessary 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 that which subject to VAT, is expected to exceed AED 187,500 in the next 30 days.
It should be noted that a non-resident person isn’t 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 that are mechanically delivered over the internet, electronic network system, or an electronic marketplace, including the supply of:
- Domain names, web hosting, and remote maintenance of programs and equipment;
- Software (SaaS);
- Images, text, and data provided electronically, such as photos, screensavers, electronic books, and other digitized documents and files;
- Music, films, and games on demand;
- Online magazines;
- Advertising space on a website and any rights related to 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 that have a similar purpose and function.
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