VAT update: E-Commerce guide

VAT update: E-Commerce guide

 E-Commerce VAT Guide in the UAE

E-commerce (also known as “electronic commerce” or sometimes referred to as the “digital economy”) generally refers to supplies of goods and services over the Internet or a similar electronic network, with products and services being sourced or supplied by electronic means, such as through a computer, phone website or electronic applications such as portals.

The VAT treatment of supplies of goods and services through electronic means, such as over the Internet or a similar electronic network, in accordance with Article 73 of the Executive Regulation and provides general guidance concerning the application of the Decree-Law and Executive Regulation in respect of e-commerce in the United Arab Emirates.

E-commerce: Supplies of Goods

Depending on the location of the supplier, the recipient, and the goods, the supply VAT treatments are summarized by the FTA on the following table:

Supplier is a UAE resident and a taxable person*

Goods delivered from

Goods delivered to

VAT on supply

VAT on supply accounted for by

VAT on import**

UAE

UAE

5%

Supplier

No

UAE

Outside UAE

0% if export conditions are met; otherwise

5%

Supplier

No

Outside UAE

UAE

No

N/A

Yes

Outside UAE

Outside UAE

No

N/A

No

 

Notes:

* Where the supplier is not registered for VAT, no VAT applies on the supply (it could apply on the import), unless the supplier has an obligation to register for VAT in accordance with the registration rules.

** The obligation to account for import VAT is on the “importer”, i.e. the person whose name is listed as the importer of the relevant goods for customs clearance purposes

Supplier is not a UAE resident

 

Residency  status of recipient

Registration status of recipient

Goods

delivered from

Goods delivered to

VAT on supply

VAT on

supply accounted by

VAT on import***

 

UAE

Registered

UAE

UAE

5%

Recipient*

No

 

Any

Not registered

UAE

UAE

5%

Supplier**

No

 

Outside UAE

Any

UAE

UAE

5%

Supplier**

No

 

UAE

Registered

UAE

Outside UAE

0% if export conditions are met; otherwise

5%

Recipient*

No

 

Any

Not registered

UAE

Outside UAE

5% or 0% if export

Supplier**

No

 
       

conditions are met

     

Outside UAE

Any

UAE

Outside UAE

0% if export conditions are met; otherwise

5%

Supplier**

No

 

Any

Any

Outside UAE

UAE

No

N/A

Yes

 

Any

Any

Outside

UAE

Outside

UAE

No

N/A

No

 
 

Notes:

* Where a non-resident supplier is already registered for VAT in the UAE, it should account for VAT directly.

** Where the VAT on the supply is the obligation of the non-resident supplier who is not yet registered for VAT, the supplier must apply to register for VAT. The supplier may be subject to penalties for non-compliance.

*** The obligation to account for import VAT is on the “importer”, i.e. the person whose name is listed as the importer of the relevant goods for customs clearance purposes.

 

E-commerce: Supplies of Services

In accordance with the Article 23(2) of the Executive Regulation; for the purposes of VAT, “electronic services” mean services which are automatically delivered over the Internet, an electronic network, or an electronic marketplace, including:

  • supply of domain names, web-hosting and remote maintenance of programs and equipment;
  • supply and updating of software;
  • supply of images, text, and information provided electronically, such as photos, screensavers, electronic books and other digitized documents and files;
  • supply of music, films and games on demand;
  • supply of online magazines;
  • supply of advertising space on a website and any rights associated with such advertising;
  • supply of political, cultural, artistic, sporting, scientific, educational or entertainment broadcasts, including broadcasts of events;
  • live streaming via the Internet;
  • supply of distance learning; and
  • services of an equivalent type which have a similar purpose and function.

For a supply to fall under the special VAT rules for electronic services, the service must be automatically delivered over the Internet, an electronic network, or an electronic marketplace.

In accordance with Article 31(1) of the Decree-Law;  the place of supply of electronic services is:

  • in the UAE, to the extent of the use and enjoyment of the supply in the UAE; and
  • outside the UAE, to the extent of the use and enjoyment of the supply outside the UAE.

 The table below summarises the high-level indicative VAT treatment of various scenarios related to supplies of electronic services as per the FTA guidance:

 

A residency status of the supplier

Place of use and enjoyment

Registration status of the recipient

VAT on supply

VAT

accounted by

UAE

UAE

Any

5% or 0% if

specifically zero-rated

Supplier*

UAE

Outside UAE

Any

No

N/A

Outside UAE

UAE

Not registered

5% or 0% if

specifically zero-rated

Supplier

Outside UAE

UAE

Registered

5% or 0% specifically

zero-rated

Recipient

Outside UAE

Outside UAE

Any

No

N/A

 

Note:

* The UAE-resident supplier will only be responsible for accounting for VAT on the supply where it is a taxable person in the UAE.

 

Supplies made through agents

Supplies of goods and services in the context of e-commerce, are often made using electronic platforms, portals, gateway or marketplaces (“electronic marketplaces”). Such electronic marketplaces will be considered as an Agent operating on behalf or for A principal, and may sell goods or services themselves, as well as act as intermediaries between the supplier and the recipient of goods or services. Depending on the marketplace being considered as an disclosed or undisclosed  agent, will determine the VAT treatment.

If you require further clarification or need any help or support on this subject, do not hesitate to contact us.

 

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