VAT ON BUSINESS OPERATING IN E-COMMERCE SECTOR
The Public Clarification provides a high-level clarification on the Value Added Tax and its amendments in respect of e-commerce in the United Arab Emirates, in the guide Federal Decree-Law No. 8 of 2017 on Value Added Tax, referred to as “Decree-Law” and Cabinet Decision No. 52 of 2017 on the Executive Regulation of the Federal Decree-Law No. 8. This guidance is not legally binding on the FTA but is intended to provide assistance in understanding and applying the VAT legislation. This guide is issued 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.
Supplies through E-Commerce
Supply of goods:
Purchasing goods through an electronic platform, such as a website or a marketplace.
Supply of services:
Services which are automatically delivered over the internet, an electronic network, or an electronic marketplace with no or minimal human intervention.
Supply of Goods Through E-Commerce:
Place of supply of goods
The basic place of supply rule for goods is that, if the goods are located in the UAE when supplied, then they are treated as supplied in the UAE. Similarly, if the goods are located outside the UAE when they are supplied, the place of supply is outside the UAE. Where the supply involves the export of goods from the UAE to a place outside the GCC Implementing States (which is currently, any other state outside the UAE), the place of supply is in the UAE.
Clarification 1: Factors Considered to Determine Registration Requirements for Non Resident Supplier In Case of Supply of Goods:
Supply made to registered recipient
The “reverse charge mechanism” is a simplification measure which allows nonresident suppliers to avoid the need to register for VAT in the UAE when they make supplies of goods in the UAE to registered persons. Where the reverse charge mechanism applies, the non-resident supplier will not charge VAT to the recipient. Instead, the VAT-registered recipient must self-account for the VAT in respect of the goods received. where the non-resident supplier is already registered for VAT in the UAE, it should account for VAT directly.
Supply made to unregistered recipient
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.