The UAE e-commerce industry is challenging for the new players due to the competitive situation persisting. To resolve the VAT related issues in the eCommerce field, FTA (Federal Tax Authority) has rolled out VAT guides for the tax agents in UAE. Analysing VAT on e-commerce sales is a tedious task due to the specifications in the transaction modes.
Rules Determining E-Commerce VAT in UAE
Let’s check out the rules to determine the e-commerce VAT in the UAE.
- VAT rules on E-commerce purchase
Purchasing any things through online shopping websites will be subjected to 5% of VAT provided the supply region should be in and around the UAE. The standard VAT rate which must be given to the things supplied inside the UAE will not apply to the medicines sold through online shopping sites. But the place of supply mustn’t be outside the UAE.
- VAT rules on exporting the goods
If the goods are subjected to exporting under e-commerce in the UAE, then the VAT rate applicable as per Article 30 of Executive Regulation is zero. But the zero VAT will be provided based on certain conditions and determined based on the party that is involved in the delivery of goods. The zero VAT will apply to the exporting of goods given below:
- The supply of goodwill be zero VAT if the supplier arranges and transports the goods from UAE or if they arrange an agent to sell on their behalf
- If the customer from another country arranges the collection of things from a supplier in the UAE and then exports those things. Zero VAT is also applicable if an agent is being appointed to perform these tasks on their behalf which is known as indirect export.
What is the VAT Accounting as a Taxable Supplier in the UAE?
The Federal Tax Authority rolls out the accounting for VAT as the taxable supplier. But in certain conditions, the VAT may be transferred to those who receive the things which are found under the Reverse Charge Mechanism.
Such Reverse Charge Mechanism will be applied if:
- The supplier does not owe any residence in the UAE
- The recipient has a residence in the UAE and is a taxable body.
What If E-commerce Sites Acts As Agent?
It is a fact that the goods that are purchased through online websites have to pay VAT and it solely depends on the electronic market functions as the agent. If the e-commerce website acts as the agent, then the medium is considered as the platform for accounting for VAT. If the website functions as the agent on behalf of the other person or supplier, then the tax treatment will be dependent on the disclosed or undisclosed agent. You can consult with our tax consultants, the best Audit Firms in Dubai.
It is advisable to get guidance from the registered tax agents in Dubai, UAE.
VAT and Electronic Service
The Federal Tax Authority talks about e-commerce services like the ones which can be used to get things directly over the digital marketplace, digital network or over the internet. Services of such types include:
- Domain names & web hosting services
- Images, text, screensavers, e-books
- Software & updating of software
- Distance education via online services
- Supply of online magazines
- Music, films, games on demand
- Supply of advertising space on a website and any rights associated with it
- Live streaming through the internet
Since FDA has given the list of electronic services, any services which are not listed will not meet the definition of electronic services. If the service involves only the internet for communication it will not come under the electronic services for VAT purposes.
How does AVA Consultants help in VAT advice?
The Covid-19 has given unprecedented growth in the eCommerce industry all over the world, especially in the UAE. VAT regulations apply to the eCommerce industry too. But the marketplace is digital and thus the calculation of VAT rates and analyzing the tax obligations is a daunting challenge. However, AVA, the best tax agent in agent assist the taxable person by the accurate VAT legislation. AVA consultants provide advice on VAT return filing, VAT registration, tax invoices, etc. Our quality VAT Services in Dubai help taxable individuals to reach success by building a good reputation before the FTA and the government.