Taxable persons dealing with the supply of electronic devices are required to look into their UAE VAT obligations as the government has introduced a special reverse charge mechanism through Cabinet Decision No. 91 of 2023. Taxable persons need to assess how the new Decision will impact their VAT obligations and make the necessary changes to their system. VAT consultants in Dubai can help you understand the implications of the reverse charge mechanism on the supply of electronic devices.
In this blog, We will walk you through the key highlights of the Ministerial Decision so that businesses can ensure VAT compliance in the UAE seamlessly. Read ahead for more insights:
What is Reverse Charge under UAE VAT?
Normally, businesses charge the VAT from the end customers and pay it to the Federal Tax Authority (VAT) later. However, under the Reverse Charge Mechanism, the responsibility of paying the tax to the authority shifts to the buyer.
The buyer pays the tax directly to the Federal Tax Authority (FTA) under the Reverse Charge Mechanism as per the UAE VAT Law and therefore the supplier is not required to pay VAT on imported goods. Also, the Reverse Charge Mechanism is applicable if the purchases are made outside the UAE. The provision can’t be applied to any purchase that has been made locally.
What are Electronic Devices as per the Decision?
Article 1 of the Decision provides you with the scope of the term ‘electronic devices’ under the purview of VAT in the UAE. The definition of electronic devices as prescribed in Cabinet Decision No. 91 of 2023 covers Mobile phones, smartphones, computer devices, tablets and pieces and parts thereof. Consult with tax agents in Dubai to get more clarity on the definition of electronic devices.
How to apply a Reverse Charge on Electronic Devices?
When a supplier supplies electronic devices to a registered recipient and the intention of the recipient is to resell or use the products or use them in producing or manufacturing Electronic Devices, the following rules will apply: (However, These provisions will not apply if the supply of Electronic Devices is subject to Tax at the zero rates in accordance with Clause 1 of Article 45 of Federal Decree-Law No. 8 of 2017)
- The supplier will not be responsible for accounting for Tax related to the supply of the Electronic Devices and is not required to report such Tax in the tax return
- The Recipient should account for the Tax on the value of the Electronic Devices received, and must be responsible for all tax obligations resulting from such supply and for accounting for Due Tax thereon
Key Requirements to Apply Reverse Charge Mechanism
Taxable persons must meet the following requirements to apply the special reverse charge mechanism:
- Before the date of supply, the recipient of electronic devices needs to: (1) provide the supplier with a written declaration stipulating the intention from the supply of electronic devices and (2) that the recipient is registered for VAT with FTA.
- Before the date of supply, the supplier of the electronic devices needs to: (1) Receive and keep the declarations (2) Verify that the Recipient of Electronic Devices is registered in accordance with the means approved by the FTA
When will the Decision take effect?
The Decision was published on August 25th 2023. It will be effective from 60 days after publication.
Hire the Best VAT Consultants in Dubai, UAE
To understand the application of a special reverse charge mechanism on electronic devices, businesses can consult with the best VAT consultants in Dubai such as Tax Gian. Tax Gian, a brand of Jitendra Tax Consultants (JTC) comprises a team of highly qualified tax experts who can offer comprehensive tax solutions in Dubai, UAE. Tax Gian offers varied tax services in the UAE such as Excise Tax, VAT and Corporate Tax. Call us today to accelerate the process of flawless tax compliance in the UAE.