Over the last few years, the UAE’s economy has been growing, expanding and evolving seamlessly. Therefore, specific regulatory changes and reforms have been introduced in recent years to aid this growth. Adding to that list, on Wednesday, the UAE’s Federal Tax Authority, (FTA Rules) clarified its stance on VAT applicability on e-commerce purchases. Here’s a look at the newly specified rules, and how it will impact the Emirati economy.
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Clarifications By FTA
The FTA restrictions underlined on Wednesday that, while ordinary e-commerce-related purchases are subject to a 5% VAT, many additional restrictions will apply only to e-commerce transactions. The FTA also stipulated that VAT will be applied to digital services. This includes domain name registration, web hosting, and even remote maintenance services. Furthermore, VAT will apply to the sale of equipment, photographs, information, electronic books, software, and other data given electronically in digitised formats. Under the new law, films, music, games, online periodicals, e-books, papers, and even sound clips would be subject to VAT.
Furthermore, other electronic supplies, such as advertising space on websites, ad rights, broadcasts related to social, economical, cultural, political, educational, entertainment and sports will also come under the new VAT list. Also added to the list is live streaming services, broadcasts of events, the supply of distance-education materials and services and every service that has a similar objective or purpose.
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UAE’s Growth
The e-commerce sector experienced a rejuvenation and further growth as a result of the COVID-19 pandemic. As a result of the stringent lockdown policies, most companies and customers took their business and shopping online. Hence, the average spending of Emirati citizens in this year has crossed Dh6,000. The e-commerce sector has grown exponentially in recent years. Hence, it has become essential to outline clear directives and mechanisms to engage with them. Since Value-Added Tax is related to both goods and services, it is an integral for sale of online products. General Director of the FTA, Khalid Ali Al Bustani stated that the VAT is growing in prominence. Hence, they had to define and identify more precise guidelines for the charging and payment of VAT on e-commerce purchases.
As a result, taxable individuals can not charge their customers either 5% or 0% VAT for taxable goods and services. Also, if supplies are not a part of tax laws, they do not come under the purview of taxable supplies. Hence, they will not require the charging and subsequent payment of VAT. Several experts stated that most businesses are unaware of the VAT registration process within the country. This is especially true for those with no office in the UAE. Do reach out to us, at KGRN, in case you have any queries regarding VAT registration or taxation, and our experts will be happy to help you out.
For enquires call @ +971 45 570 204 / Email Us : support@kgrnaudit.com
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