VAT guidelines online sellers should know in UAE

VAT for E-commerce in UAE

Online trading is booming, giving buyers and sellers some time to relax. E-commerce, despite new in some markets, is subject to value-added taxes in most countries. Our country of consideration will be the United Arab Emirates in this article, and we will explore what possible guidelines VAT carries for online businesses. If you are an online seller based in UAE and still looking for a guide on how your transactions will be taxed, this article is for you. Scroll through this piece to learn more.

VAT for E-commerce in UAE:

Stakeholders (online sellers) should keep in mind the tax implications of the electronic transaction. According to Federal Tax Authority (FTA), the VAT rate on electronic sales is 5% in UAE. A point to remember here is that VAT will be imposed only on those transactions that will take place within the defined jurisdictions.

Major points to take note of:

The impact of VAT on online business is significant in UAE. Keeping this in mind, the tax authorities like FTA has issued some guidelines for both online buyers and sellers. Key points to remember are discussed here.

  • A VAT of 5% applies to all purchases made online. The tax is as necessary as the ordinary sales tax on shopping from an outlet.
  • A non-UAE resident should register for tax and make supplies of goods and services, according to Article 18 of the Decree-Law.
  • A consumer making online purchases should register for VAT within the specified timeframe to comply with tax legislation.
  • Non-UAE online suppliers should also register for VAT as soon as they make their first supply.
  •  FTA has issued a complete guide over the subject covering many aspects. Online sellers should comply with these guidelines by hiring the services of the Best VAT consultancy in Dubai. We will highlight some of the main points here. Let’s get to work without further ado.

Read also: Why Keeping Receipts Are Important For A Business?

General rules for the supply of goods:

Goods, when sold and bought online, are subject to VAT law provisions on varied bases. The law imposes different conditions, depending on the place of supply of goods. The goods will either be inside UAE or outside UAE. The location of supply makes a considerable difference in this regard. Let us discuss the distinguishing points

  • Inside UAE: The place of goods supply in UAE will be where the goods are produced at customer disposal. If the supplier is arranging a transport facility to dispatch these commodities, the commencement point will be considered the supply place.
  • Outside UAE: As a supplier, if you are transporting your goods to a customer located outside the UAE, the place of supply will be where the goods are transported. The tax liability will be in the customer’s location.

Four supplying scenarios in online selling of goods:

Following are the possible cases when an online transaction of goods takes place.

  • When both the supplier and the buyer are located in UAE. The goods will either be delivered from within or outside the UAE
  • When the supplier is UAE-resident, but the customer is located out of the UAE. Goods will be delivered to the customer either from inside or outside the UAE.
  • When the customer is a resident of UAE, but the supplier is a non-resident. Goods can be delivered either from inside or outside UAE.
  • When both the customer and the supplier are non-UAE residents. The supplier will deliver goods to the buyer either from inside or outside the UAE.

Special Scenario: There are, however, special considerations from FTA and other tax bodies. The place of supply of goods will be the non-resident customer’s state if he/she is a registered VAT customer.

Each of the above cases entitles the supplier to consider the impact of VAT on electronic trading. The situation is often confusing, especially if the supplier cannot find a helpful clue in tax matters. Such cases highlight the role of the Best VAT consultancy in Dubai. A piece of expert advice will make things easy for all the parties involved.

General rules for the supply of services:

When it comes to services, the term widens. Some several services and activities fall under this category. The term includes music, movies, games, the supply of live streaming using the internet, supply of software, and other demand programs.

Same as the supply of the goods, the place of supply in services is a deciding factor. The area of supply in case of services is normally the supplier’s residence. However, if the customer is VAT-registered, the place of supply will shift to the buyer’s home.

Read also: Accounting Firms – Helping Businesses Know Their Numbers

Legalize your electronic business with VAT consultants:

Online trading is earning businesses more money, but it should be compliant. To avoid any legal issues and ensure smooth execution of your online business, take VAT consultants on board. Their expert advice will keep your business on track.


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