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UAE Clarifies VAT Rules For E-Commerce

by Lorys Charalambous, Tax-News.com, Cyprus

30 November 2020


The United Arab Emirates' Federal Tax Authority has clarified the value-added tax rules that apply to e-commerce transactions.

The FTA discussed the tax rules for e-commerce during a second virtual workshop for accredited tax agents. During the workshop, participants' questions about the tax treatment of the e-commerce sector were answered by FTA experts.

FTA officials indicated that all goods and services purchased through online shopping sites are generally subject to five percent VAT if the place of supply is in the UAE. The tax is also applied to most of the goods that are sold inside the UAE, subject to some exceptions per the VAT legislation (such as medicines sold on websites). Additionally, the import of goods is subject to VAT.

The FTA highlighted that goods purchased online that are to be exported are eligible for zero rate VAT as long as certain conditions are fulfilled. The tax treatment varies according to the party contractually responsible for delivering goods. Exports to the GCC countries are currently also eligible for zero-rated VAT. Both official and commercial evidence of export must be obtained and retained, the FTA said.

The presentation confirmed that accounting for VAT is the responsibility of the taxable supplier. However, the reverse charge mechanism (RCM) is applied if the recipient is VAT registered and the supplier does not have a place of residence in the UAE and is not a VAT-registered person. In the event that a supply is made by a person who is not a resident of the UAE, to a non-registered person in the UAE, the RCM is not applicable and the non-resident supplier is required to register for VAT and to account for VAT on its supplies.

The presentation covered how to apply VAT on the supplies of goods and services made within the e-commerce framework and how to calculate VAT on these supplies. The FTA also presented an overview of e-commerce, the principles of VAT on the supply of goods via e-commerce and the supply of electronic services, and the effects of VAT on electronic markets using practical examples.

FTA experts indicated that, for goods and services made through electronic platforms, portals, or markets, the tax treatment is dependent upon whether the electronic market operates as the principal or agent. If the electronic market acts as principal, the online market is treated as a supplier of goods or services and is responsible to account for VAT. If the online market operates as the agent acting on behalf of another supplier, the tax treatment of the supply is fully dependent on whether the online market is acting as a disclosed or undisclosed agent, the FTA officials said.

TAGS: United Arab Emirates | tax | commerce | VAT legislation | accounting | e-commerce | legislation | services | Tax

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