March 10 2021

Tax Authority Announces VAT Application on Supplies and Services Provided by Artists and Social Media Influencers

Source: IBFD Tax Research Platform News

The Federal Tax Authority (FTA) has confirmed that VAT applies to supplies and services provided for consideration by artists and social media influencers (SMIs). The FTA specified that such supplies and services include inter alia:

  • online promotional activities performed on behalf of other businesses (such as product promotion in a blog or a video, or the promotion of a business on a social media post);
  • physical appearances, marketing and advertising related activities;
  • providing access to any social media influencers' networks on social media, and
  • any other services provided by SMIs for a consideration.

The FTA specified that artists and SMIs based in the UAE and making taxable supplies (including zero-rated supplies), are required to register for VAT (provided the value of their taxable supplies and imports reaches the mandatory registration threshold of AED 375,000 in the last 12 months). They may also voluntarily register for VAT if the value of their taxable supplies and imports or taxable expenses incurred in the last 12 months exceeded, or is expected to exceed in the next 30 days, the voluntary registration threshold of AED 187,500.

The FTA also specified that for the purposes of computing the threshold, artists and SMIs should take into consideration all the taxable supplies they made, even if such supplies do not fall within the scope of their core artistic or influencer activity. Artists and SMIs must issue tax invoices for all supplies subject to the standard rate of 5%.

The FTA clarified that if a non-resident artist or SMI contractually provides services to a VAT registered recipient in the UAE, the non-resident artist or SMI would not be required to register for VAT in the UAE (the UAE resident recipient of such services would have to account for VAT under the reverse charge mechanism). Where an artist or SMI provides services to unregistered UAE-based individuals or businesses, and the place of supply falls within the UAE, there is no registration threshold. Therefore, where an artist or SMI provides any services to such an unregistered recipient, they will be required to register for VAT in the UAE and charge VAT on the related supply.

The FTA confirmed that the VAT implications of artists and SMIs supplies should be assessed on a transaction-by-transaction basis.

The FTA announcement was published in the latest Basic Tax Information Bulletin on 7 March 2021 in the FTA's official website.

Note: The FTA launched the Basic Tax Information Bulletins to provide guidance to businesses and taxpayers with regard to the application of laws, executive regulations and tax procedures.