VAT ON ECOMMERCE BUSINESS IN UAE
VAT on e-commerce in the UAE is assessed based on the location of the seller and the receiver. Online sales will be subject to a 5% VAT in UAE. In the field of e-commerce, buying products from an electronic channel, such as a website or a marketplace, is referred to as a supply of goods. After the items have been imported, they are shipped to the receiver.
The supply may take any of the following simple types, depending on the location of the source, the consumer, and the goods:
- (i)A supply made by a resident seller to a recipient in the UAE, with products supplied from inside or outside the UAE;
- (ii)A supply by a resident supplier to a recipient outside the UAE, with products shipped from within or outside the UAE;
- (iii)A supply by a non-resident supplier to a recipient within the UAE, with goods delivered from within or outside the UAE;
- (iv)A non-resident supplier's supply to a recipient outside the UAE, of products supplied from either within or outside the UAE.
The retailer must consider the effect of VAT on the selling of products in any of the situations mentioned above. Furthermore, where the products are physically transported into the UAE from anywhere other than the UAE.
Impact of VAT on E-commerce Business
The Federal Tax Authority (FTA) has clarified that all sales made through online shopping sites are subject to the same 5% Value Added Tax (VAT) as any other purchase made through conventional channels provided the items are delivered within the UAE.
As per the Article (18) of Decree Law, a non-resident supplier shall register for tax and makes supplies of goods or services, there is no threshold limit applicable to the non-residents. “This means if a consumer in the UAE buys a service/product from an online platform (social media, e-commerce, education, games, arts, fashion, music or any other services); the non-resident supplier shall register for the VAT within the stipulated time and comply with local tax legislation.
VAT Treatment on E-commerce Sales
The Federal Tax Authority of the United Arab Emirates issued guidance on the value added tax (VAT) treatment of e-commerce transactions and electronic services. The advice also addresses the tax authority's VAT status.
Apps, e-games, e-subscriptions, smart phone apps, and e-content are examples of physical products and computer resources that are subject to strict laws that govern how VAT is applied to them.
(a) Sales and purchases of goods or services through e-commerce within the UAE are called domestic sales and are subject to the normal 5% VAT limit.
(b) Purchases of goods or services from outside the UAE are subject to the normal 5% VAT fee.
If the purchaser of products or services is in the UAE and registered for VAT (as a taxable person), the recipient is expected to determine the normal 5% VAT using the reverse charge process, in which the taxable recipient calculates the due VAT instead of the non-resident seller.
If the receiver is an end customer (i.e. not registered with the tax authorities for VAT), the agent or logistics firm charges and pays the usual 5% VAT to the authority. For all imports on behalf of a non-registered person, the agent (who supplies/imports) would be responsible for complying with UAE VAT.