Beginners Guide to VAT on Online Trading

VAT In UAE

The UAE is implementing VAT by 1st Jan 2018. VAT is a new tax concept for the region. There will be the huge impact on the E-commerce transactions i.e., online trading transactions by this new VAT UAE law. With the evolution of E-commerce in the UAE, life has completely become a convenient boon influencing a million lives, it’s like the world is at our fingertips. For businesses and customers everything has changed; the way of selling and buying, the way of communicating, traveling, eating, researching, working, etc.

For every business which are running online businesses, it is important for them to understand the impact of VAT implementation in UAE for their transactions. Through e-commerce, transactions are done not only for goods but even as services. With the introduction of  VAT in the UAE, it is expected to cross thirty-five billion AED businesses through e-commerce by the year 2018 in the country.

It is the responsibility of the seller to learn about Value Added Tax in the UAE and how VAT will effect on every single business transactions. Let us now analyze how VAT will be calculated for both goods and services in online transactions or e-commerce with the implementation of VAT in the UAE.

Goods:

  • If you are a dealer of a product and has options to sell it through online to your customer, it can be within UAE or outside UAE. As per the provisions of the UAE VAT law, the place of supply is the place where goods are made at the disposal of the customer. That means it is not where goods are dispatched or transported. It is only where the goods are at the disposal of the customer. If, you are arranging the transportation, the place of supply is where the transportation begins. That means normally your warehouse where the materials are stored.

At the same time if you are transporting your material to a customer located in another GCC country, the place of supply will be where the transportation terminates. That means the tax liability will be in your customer’s location.

Services:

  • If you are serving to a taxable customer then the place of supply will be where the customer is located. At the same time, if you are serving to a non-taxable customer, the place of supply will be the place where your company is established. In such cases, if you are serving a customer located in another GCC country, tax liability will arise in the country where your country is registered.

In the case of online transactions/e-commerce transactions also the above rule will be applicable. Hence, one has to look into the place of supply while booking the transactions. If the orders are taken in the UAE, but goods are delivered to another country where the customer is located, we have to look into from where the transportation of the goods was started. Whether it is from the warehouse in the UAE or outside the UAE of the supplier. In the case of services, attention has to be given where the service is actually consumed.

Finally, it is very essential to gain knowledge about the impact of VAT implementation in the UAE for E-commerce businesses as it is one of the booming industry for businesses in the UAE. The lack of knowledge to comply with the VAT implementation in the UAE is likely to foster problems and subsequent fines. A customer has to register for VAT in the UAE only if he having a business more than the turnover prescribed under VAT Registration Threshold.

Emirates Chartered Accountants Group is conducting seminars on VAT in the UAE for the businesses to be aware of the UAE VAT law and its impact on their businesses. If you are interested in attending any of such VAT seminars/VAT workshops you may contact our office.

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