The UAE Ministry of Finance (MoF) has issued Ministerial Decision No. 26 of 2023 for businesses describing the criteria and conditions for keeping Records of the e-commerce supplies they have made. Followed by this, the UAE Federal Tax Authority (FTA) published a Public Clarification VATP033 clarifying the amendment to the Emirates’ reporting of VAT. Businesses engaged in e-commerce transactions need to follow these two guidelines to ensure VAT compliance in the UAE.
VAT consultants in Dubai can help businesses understand the guidelines and take necessary actions. Read ahead to gain more insights:
Criteria and Conditions for Electronic Commerce
On 22nd February 2023, the MoF issued the “Ministerial Decision No. 26 of 2023 on the Criteria and Conditions for Electronic Commerce for Purposes of Keeping Records of the Supplies Made”. The Decision outlines the criteria & conditions for e-commerce as per the provisions of Clause 5 of Article 72 of the UAE VAT Executive Regulation which was introduced following Cabinet Decision No. 99 of 2022 amending the provisions of Articles 3 and 72 of the UAE VAT Executive Regulations.
As per Article, 72 taxable persons making taxable supplies through e-commerce are required to keep records of the transaction to prove the Emirate in which the supply is received. It says the supply of goods and services will be treated as e-commerce supply through an Electronic Commerce Medium if all of the following criteria are conditions are met:
- The goods and services need to be listed or advertised on an Electronic Commerce Medium
- The goods and services must be ordered via the Electronic Commerce Medium, regardless of whether the payment is made online or not
- In the case of a supply of Goods, the Goods must be delivered to a location specified by the customer whereby this location is not owned by the supplier nor operated by that supplier
- In the case of a supply of Services, the Services are rendered, or the right to receive the Services is granted to the customer with minimal or no human intervention
Guidelines for Emirates Reporting as per VATP033
The FTA’s Public Clarification VATP033, issued on 24th February 2023, further clarifies that Electronic Commerce Medium includes a broad range of concepts, such as stores in the metaverse, smart kiosks and robotic devices. The clarification also explains what factors should be taken into account to determine in which Emirate the supply of goods or services must be reported:
- The Emirate in which the services are received needs to be determined as per the relevant factors (FTA will accept the place of residence of the customer taking precedence over, for example, billing address or IP address).
- For the supply of goods, the Emirate in which the goods are received, need to be determined by the location specified by the customer, taking precedence over the place of residence, billing address or IP address
Why Emirates Reporting is Important for E-commerce Businesses?
As per the UAE VAT regulations, tax registrants are required to report their standard-rated supplies per Emirate in the relevant box 1 of their VAT returns. This means they should keep records of their transactions to prove in which Emirate the supply was made. As per the general rule, the supplies must be reported in the Emirate in which the taxable person’s establishment which is most closely related to the supply, is located.
However, the new regulations of VAT in the UAE state that qualifying registrants, effective from 1st July 2023, need to report supplies made through e-commerce in Box 1 of their VAT return based on the Emirate in which the supplies of the goods or services are received by the customer, and keep the relevant supporting evidence. As per the VATP003, a qualifying registrant is a taxable person supplying goods and services through electronic commerce which exceeds AED 100 million over a calendar year.
Seek the Advice of Leading VAT Consultants in Dubai, UAE
If you are a taxable person supplying goods and services through an Electronic Commerce Medium, you must assess whether they fall within the new Emirates’ reporting mechanism for VAT in the UAE. Taxable persons making taxable supplies through Electronic Commerce Medium who are subject to meeting the threshold of AED 100 million must assess the changes related to record-keeping to prove the Emirate in which the supply is received and to report the same in the VAT return. This could be a tough process for you for which VAT consultants in Dubai such as Tax Gian, a brand of Jitendra Tax Consultants and Jitendra Chartered Accountants (JCA), can offer assistance.
Tax Gian has a team of highly qualified and experienced tax experts who can help you assess your current tax position, advise on the appropriate tax treatment, prepare clarification requests, or represent you in front of the FTA as registered tax agents in the UAE. We can also assist you with complying with the UAE corporate tax law, Excise Tax, Economic Substance Regulations (ESR) Ultimate Beneficial Ownership (UBO) and Anti-Money Laundering (AML) Law. You can call us to discuss your specific tax requirements with Tax Gian and determine the way forward.