UAE’s Federal Tax Authority (FTA) has issued new guidance to clarify several aspects of taxing (VAT) e-commerce transactions for products and services with actual use or enjoyment within the UAE.
Even though numerous general VAT rules apply to e-commerce, there are several special rules that apply particularly to e-commerce transactions.
Categorization of Taxable Transactions
Supply of electronic services
The guide outlines the tax treatment of services that are provided directly over the internet, an electronic network, or an electronic market, including;
Web-hosting and remote maintenance of programs and equipment
Software (including the updating thereof),
Images, text and information provided electronically such as pictures, screen savers, electronic books, documents and
Other digitized files, music, movies and games on demand, and online magazines.
Electronic services supplies
Supply of advertising space on a website and the rights associated with that advertisement,and
Political, cultural, artistic, sports, scientific, educational or entertainment broadcasts, including broadcasts of events, live streaming via the internet, the supply of distance learning services, and services of any equivalent type that have a similar purpose and mission.
VAT on e-commerce transactions
FTA has intimated that all goods and services purchased through online shopping sites are subject to five percent VAT if the place of supply is in the UAE, like any other purchases made by traditional means, as per the special provisions governing the tax treatment of supplies.
Taxation
Taxable individuals/organizations should charge VAT to customers when supplying taxable goods or services (generally, at the standards rate of five percent, or where the VAT Law permits, at a rate of zero percent). If the supplies are exempt from tax, these supplies are not treated as a taxable supply and therefore no VAT needs to be charged on these supplies.
Registration
The FTA clarified that different conditions and requirements may apply to mandatory or voluntary registration, depending on whether a person has a place of residence in the UAE. A person is considered to have a place of residence within the UAE for VAT registration if he has a place of establishment in the UAE.
Non-residents can choose to not register voluntarily for VAT based on his ‘taxable expenses.
