UAE Issues Guide On E-Commerce VAT Obligations

by Lorys Charalambous, Tax-News.com, Cyprus

21 August 2020

The United Arab Emirates' Federal Tax Authority has released a new guide on the value-added tax rules for e-commerce and the digital economy.

Announcing the release of the E-Commerce VAT Guide (VATGEC1), the FTA highlighted that VAT is due on such supplies where they are used or enjoyed in the UAE. Non-resident suppliers must register for VAT as soon as they make supplies to UAE-resident consumers.

The guidance clarifies how the VAT law applies to the supply of goods and services provided through electronic means and how businesses should account for that VAT. The guide also sets out how businesses should determine the place of supply.

The guide states that all goods and services purchased through online sites are subject to five percent VAT if the place of supply is in the UAE, except for goods that are specifically exempt from VAT under the UAE's VAT law.

Overseas sellers transacting with consumers in the UAE should register for value-added tax as soon as they make their first supply, and collect and remit tax for business-to-consumer transactions. The reverse charge mechanism applies for business-to-business supplies of non-resident sellers, under which the UAE-based taxable person who receives the supply will be required to account for the VAT.

The guide sets out input tax recovery rules, when VAT is due, the rules where supplies are made through agents, and the scope of VAT on electronically supplied services.

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