Application of the Reverse Charge Mechanism on Electronic Devices among Registrants in the UAE for the purposes of Value Added Tax
The Federal Tax Authority (FTA) has released a Public Clarification to shed light on the recent Cabinet Decision No. 91 of 2023, which pertains to the application of the reverse charge mechanism for Electronic Devices among registrants in the State for Value Added Tax (VAT) purposes.
This article aims to provide a comprehensive understanding of this mechanism, its scope, compliance requirements, and implications for suppliers and recipients.
Scope of the Reverse Charge Mechanism
The Reverse Charge Mechanism is applicable to registrants supplying Electronic Devices to other registrants for resale or use in manufacturing. The recipient is responsible for accounting for the Due Tax under a reverse charge.
Electronic Devices encompass mobile phones, smartphones, computer devices, tablets, and related parts and pieces. The Decision applies to wireless-operating phones and all types of computer devices.
The Reverse Charge Mechanism requires both supplier and recipient to meet specific compliance requirements. The recipient must provide written declarations confirming the intent to resell or use the devices for manufacturing, along with proof of VAT registration.
Applications of non-compliance
Failure to meet compliance requirements will lead to the supplier accounting for VAT and the recipient being unable to recover input tax. This underscores the importance of adhering to the specified compliance procedures.
Cabinet Decision No. 91 comes into effect on 30th October, 2023, affecting all supplies of Electronic Devices from this date onwards. Suppliers and registered recipients should prepare to implement the required VAT treatment and compliance obligations.