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VAT ON E-COMMERCE BUSINESS IN UAE: Comprehensive Guide

Online VAT registration Dubai

There will be a 5% VAT on all online sales in the UAE. A supply of goods is what is meant when purchasing things through an online marketplace or website in the context of e-commerce. The items are mailed to the recipient after being imported. When calculating VAT for online sales in the UAE, the seller and recipient’s location is considered.

Ecommerce sellers have to have online vat registration Dubai done, and this comprehensive guide will help you to know more about the VAT to be paid for goods they sell. Depending on the location of the source, the buyer, and the items, the supply could be of any of the specific categories listed below:

  • A supply made to a recipient in the UAE by a resident seller of goods sourced from inside or outside the UAE;
  • A resident supplier providing goods delivered from the UAE or from outside the country to a recipient outside the UAE;
  • A non-resident supplier providing goods from within or outside the UAE to a recipient within the UAE;
  • The delivery of goods from inside or outside the UAE by a non-resident supplier to a recipient outside the UAE.

In each of the scenarios mentioned above, the retailer must consider how the VAT would affect the sale of the goods if the goods are physically brought into the UAE from a country other than the UAE.

VAT’s Effect on Online Businesses:  

The Federal Tax Authority (FTA) has stated that as long as the goods are delivered within the United Arab Emirates, all sales conducted through online shopping platforms are subject to the same 5% Value Added Tax (VAT) as any other transaction made through conventional channels.

According to Article 18 of the Decree Law, a non-resident supplier must register for tax and make supplies of goods or services, and no threshold limit applies to non-residents. “This means that if a consumer in the UAE purchases a service or good from an online platform (social media, e-commerce, education, games, arts, fashion, music, or any other services), the non-resident supplier must register for the VAT within the stipulated time and comply with local tax legislation.

VAT Application to Online Sales

The value-added tax (VAT) treatment of electronic services and transactions was clarified by the Federal Tax Authority of the United Arab Emirates. The VAT status of the tax authorities is also covered in the advice.

Physical goods and computer resources, like applications, e-games, subscriptions, smartphone apps, and e-content, are governed by tight legislation that specifies how VAT should be charged to them.

  • Domestic sales are defined as e-commerce transactions in the UAE and are subject to the standard 5% VAT cap.
  • The standard 5% VAT fee is applied to purchases of goods or services made outside the United Arab Emirates.

The recipient is expected to calculate the standard 5% VAT utilizing the reverse charge technique, in which the taxable recipient calculates the due VAT rather than the non-resident seller if the buyer of goods or services is in the UAE and registered for VAT (as a taxable person).

The agency or logistics company bills and pays the standard 5% VAT to the authority if the recipient is an end client (i.e., not registered with the tax authorities for VAT).

The agent (who imports and supplies) is in charge of adhering to UAE VAT for all imports made on behalf of a non-registered individual.

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