Retailers, both physical and online, are legally obliged in registering for VAT in UAE. With VAT registration, businesses including sellers on UAE Amazon can start charging the appropriate VAT rates on goods and services. If your online business has a taxable turnover of AED 375,000, you have to register with the Federal Tax Authority for VAT. If the annual turnover is less than the mandatory threshold, registration can be voluntary provided you have a turnover at least AED 187,500.
However, these mandatory and voluntary VAT registration thresholds only apply for local businesses. If you are outside of UAE but you make taxable supplies in the country, you are required by law to undergo the VAT registration process.
When is a supply taxable for VAT in UAE?
In the context of e-commerce, supply of goods involves the purchase of goods through electronic platforms, including UAE Amazon. As soon as a product is purchased, it is then sent to the recipient. A supply can take on these basic forms, depending on the supplier’s location, goods, and the recipient:
- A supply is by a UAE-resident seller for a recipient within the UAE with the products being delivered from in or out of UAE;
- A supply is by a UAE-resident seller for a recipient that is outside UAE with the products being sent from in or out of UAE;
- A supply is by a non-UAE resident supplier for a recipient within UAE with products sent from in or out of UAE;
- A supply is by a non-UAE resident supplier for a recipient not within UAE with the products sent from in or outside UAE
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What are the appropriate VAT rates to be charged for supplies?
For goods that are supplied locally:
The default or standard VAT rate for e-commerce transactions is five percent. This rate applies to most products and services sold within UAE. However, there are goods that are subject to zero percent VAT rate even when the goods are sold locally. An example of goods that are zero-rated even when they’re sold locally are the qualifying medical equipment and pharmaceutical products.
For goods sold outside of UAE:
When goods are delivered outside the UAE, supplies may be eligible for zero-rating. This is in accordance with the UAE Executive Regulations Article 30. The conditions or eligibility for zero-rating for the purpose of VAT in UAE vary, hugely depending on the party that is contractually responsible with the dispatch of supplies.
1, If the e-commerce retailer is the one responsible with arranging the transport for sold goods from UAE and appoints an agent in doing so for its behalf (referred to as direct export), then supply can be eligible for zero-rating should these conditions are met:
- Goods are exported physically to a place that is outside the VAT-implementing GCC states or are placed into customs suspension regime according to the Common Customs Law of the GCC within ninety days from the supply date
- Commercial and official proof of the customs suspension or export has been retained by the supplier or exporter
- If the customer based overseas is responsible in arranging the collection for goods from a UAE-resident supplier and exports the goods or appoints an agent in doing so for his/her behalf (referred to as an indirect export), supply is eligible for zero-rating provided conditions are met such as:
- Goods are exported physically to a place that is outside the VAT-implementing GCC states or are placed into customs suspension regime under the Common Customs Law of the GCC. It has to be within ninety days from the supply date under the agreed arrangement by the overseas customer and the UAE-resident supplier before or at the supply date
- Customer overseas obtain a commercial and official evidence of customs suspension or export in accordance with the Common Customs Law of the GCC and provides the UAE-resident supplier with copies of the proof of transaction
- Goods don’t leave UAE, which are in the possession of crew members or passengers of ships and/or aircraft
Take note: Among the common conditions that apply for zero-rating for exports is the supplier (for direct export) or receipt (for indirect export) should obtain commercial and official evidence of export. Official evidence includes export documents that are issued by Emirate Customs Department with respect of goods that leave the UAE. For most Emirates, the exporter has to retain an exit certificate.
Commercial evidence is a document that is issued by a supplier or recipient, providing proof of transportation of goods overseas.
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Who will account for VAT for imports?
The obligation in accounting for import VAT in UAE will be the importer. The importer is the entity or person whose name has been listed as importer of relevant goods. Where goods are from overseas and imported into the UAE, goods are subject to five percent import VAT.
Do you have questions related to e-commerce VAT in UAE? Talk to our regulated tax agents here in VAT Registration UAE today!