The UAE Federal Tax Authority (FTA) has published a Guide on the VAT treatment of supplies of goods and services made through the Internet and similar electronic networks. The Guide provides guidance on the supply of goods and services made via the electronic market place, as follows:
Supply of goods
The rules with regard to the supply of goods depend on whether the supplier is resident in the United Arab Emirates or not and on the location from where the goods are delivered (from inside the United Arab Emirates or outside), as follows:
- a supply made by a resident supplier to a recipient in the United Arab Emirates, with goods delivered from inside the United Arab Emirates: the supply would be subject to VAT at a rate of 5% unless goods are subject to 0%;
- a supply made by a resident supplier to a recipient in the United Arab Emirates, with goods delivered from outside the United Arab Emirates: the supply will be subject to VAT on the import and will be accounted for by the importer;
- a supply by a resident supplier to a recipient outside the United Arab Emirates, with goods being delivered from inside the United Arab Emirates: the supply will be subject to 0% if export conditions are met; if not, it would be subject to VAT at a rate of 5%, or 0% for specific goods;
- a supply by a resident supplier to a recipient outside the United Arab Emirates, with goods delivered from outside the United Arab Emirates: the place of supply is outside the United Arab Emirates, therefore VAT would not be applicable;
- a supply by a non-resident supplier to a recipient in the United Arab Emirates, with goods delivered from inside the United Arab Emirates: the supply would be subject to 5% or 0% for specific goods, unless the goods are delivered outside the United Arab Emirates, in which case the rate of 0% would apply if the export conditions are met. The VAT should be accounted for by the recipient if it is a registered person; otherwise, the supplier will be responsible to account for the VAT;
- a supply by a non-resident supplier to a recipient in the United Arab Emirates, with goods delivered from outside the United Arab Emirates: VAT would be applicable only if the goods are imported into the United Arab Emirates;
- a supply by a non-resident supplier to a recipient outside the United Arab Emirates, with goods delivered from inside the United Arab Emirates: If the goods are delivered to the United Arab Emirates, then the supply is subject to VAT rate of 5% (0% for specific goods). However, if the goods are delivered outside the United Arab Emirates, the supply would be subject to 0% if the export conditions are met; otherwise, the rate of 5% (0% for specific goods) would apply; and
- a supply by a non-resident supplier to a recipient outside the United Arab Emirates, with goods delivered from outside the United Arab Emirates: VAT would be applicable only if the goods are imported into the United Arab Emirates.
Supply of services
To fall under the special rules for electronic services, the supply of services must meet the following conditions:
- the services must be referred to in article 23.2 of the Cabinet Decision No. 52 of 2017 on the Executive Regulation of the Federal Decree-Law No. 8 of 2017 on Value Added Tax and its amendments referred to as "Executive Regulation". Any services which are not mentioned in the article and supplied via the Internet or any network are not considered electronic services; and
- the services must be automatically delivered via the Internet, an electronic network, or an electronic marketplace. The delivery of the services must be essentially automated; only a small degree of human intervention is acceptable.
The VAT rules on electronic services depend on whether the services are being used and enjoyed in the United Arab Emirates or not, as follows:
- if the place of use and enjoyment of the service is the United Arab Emirates, the supply of services is subject to a rate of 5% (0% for specific services); and
- if the place of use and enjoyment of the service is outside the United Arab Emirates, the supply of services is not subject to VAT.
Supplies made through the electronic market place
With regard to the supply of goods and services made through an electronic market place, such as distribution platforms, portals gateways, etc., the guide provides that the VAT treatment would depend on the arrangement made between the supplier, the intermediary and the recipient of the supply:
- where the intermediary acts as a disclosed agent between the supplier and the recipient of the supply, the supply is treated as made directly by the supplier to the recipient. The supplier should account for the VAT; and
- where the intermediary acts as an undisclosed agent between the supplier and the recipient of the supply, there are two supplies for VAT purposes – from the supplier to the intermediary, and from the intermediary to the recipient. In that case, both the supplier and the agent should account for the VAT.
The Guide, published on 13 August 2020, further clarifies that if the intermediary charges a fee or a commission, this would be considered a separate supply which needs to be analysed (including the place of supply rules) independently from the supply of goods and services underlying the services.