The VAT guide (VATGEC1) confirms that non-resident suppliers of eCommerce goods or digital services that are used and enjoyed in the UAE will need to register for VAT.
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 (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 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, unless there is another person in the UAE who is responsible for accounting for VAT on such activities. As such, for non-resident suppliers, the registration threshold is, in effect, nil.
Voluntary registration (the below is sourced directly from the FTA)
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”.
VAT Treatment of supplies of goods when the supplier is not a UAE Resident
The guide provides a very useful table to help non-resident businesses determine how they should be treating VAT which will help indicate whether a registration would be required.
* 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.
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.
VAT IT has been following the VAT developments and legislation changes in the UAE closely. For any guidance around VAT recovery please get in touch with us by leaving your details. If you believe you may have to register for VAT in the UAE, our sister company vatglobal is able to offer assistance with your VAT compliance needs.