VAT Regulations for E-Commerce Businesses in UAE

Admin
22 Apr 2021

Before we can get to the regulations, if you’re an online business/service or an e-commerce business in uae, here’s a quick brush up on some basics:

What is VAT?: VAT is an indirect form of tax. This is a tax that is not a burden on your company, but on the end consumer. You will charge & collect VAT from the customer and pay this (after reducing the VAT on your expenses) to the FTA. If your customer is a business and is registered for VAT then they will be able to claim back this VAT from the FTA. So being registered to VAT, will not impact the income you earn.

When should you register for VAT? : To decide when to register click here to read more about when you must take this decision.

1) (Taxable supplies + Imports) crosses the Mandatory threshold (AED 375,000) you must register

2) (Taxable supplies + Imports + Expenses subject to VAT) crosses the Voluntary threshold (AED 187,500) you have the option to register.

If you are not a resident in UAE and do not have another resident in UAE who will take the responsibility to account for VAT, you will need to register for VAT as well based on the above criteria. However, do note you cannot register for VAT voluntarily on the bases of expenses subject to VAT in UAE.

Definitely read this:

If you have an app, a website or use any online platform to make sales, like every business in UAE you need to fully comply with all the VAT requirements.

If you decide to register you will then have to start charging VAT to your customers, when applicable, raise tax invoice for each sale and also file for your VAT returns quarterly. Don't worry, it's not as complicated as it seems. We are here to simplify this for you.

Not sure how to go about this? Drop us a line. We have been handling UAE VAT Filing and Returns since it was introduced.

One of the main advantages of being registered is that you now have the opportunity to claim back the VAT on all your business expenses except-
1) Certain entertainment expenses,
2) Purchase, rent or lease of vehicle that is also available for personal use.

Browse through these FAQs created especially for the UAE e-commerce platforms:

Do I need to raise a Tax Invoice?

Yes, once you are registered for VAT, you must raise a tax invoice. If your invoice value is over AED 10,000, you then have the option to raise a simplified tax invoice, which has less requirements as per the law. If you want us to verify if your tax invoice meets the compliance requirements, feel free to get in touch with us for a free consultation.

I am a business located in another country, and to make online sales in UAE, do I need to register for VAT in UAE?

Yes! If you do not have a business in UAE that will account for your VAT, then you need to register for VAT based on if you cross the threshold. You will be issued a Tax Registration Number (TRN) and meet all the VAT compliance requirements in UAE.

I sell my web designing services (or any other services) online, how do I decide the place of supply?

You need to find out where the service is being enjoyed. If it is in the UAE, the place of supply will be in the UAE, and VAT will be applicable, if it is outside UAE, then the place of supply is outside the UAE, and no VAT will be applicable.

How does the VAT treatment work if I have used an agent (for example amazon) to make a sale?

This depends on what the agency agreement is. If the agent is simply a marketplace connecting the principal supplier to the end customer - This is similar to the case of Amazon, or Zomato. In this case, the obligation to account for VAT is of the principal supplier, and you are directly making the sale to the end customer. The agent will charge the supplier the agency fees, which in general will be charged 5%.

If the agent directly makes the sale to the customer & does not disclose you as the primary supplier -

There are basically 2 transactions that happen here simultaneously. You will have to raise an invoice with VAT to your agent. The agent will raise an invoice with VAT to the end customer.

What happens if I don't register for VAT, even after crossing the mandatory threshold?

You will be penalized AED 20,000 by the FTA for late registration. You will be given an effective date of registration based on when you crossed the threshold. Because of this, you will be required to file returns in the past. You will then have an additional penalty for late return filing of AED 1,000 for the first return and AED 2,000 for each return after that. There will also be a charge for a late payment fee, which will be a percentage of the payable amount, this can go up to 300%.