Potential Qualified Registrants should assess their earnings each calendar year and comply with reporting requirements accordingly
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Photo for illustrative purposes only. – KT file
The Value Added Tax (VAT) Act requires tax revenues and administrative penalties to be shared between the federal and emirate governments. Continuing this, the User Guide for VAT Returns for companies with permanent establishments in the UAE, issued in February 2018, mentioned that their standard service should be reported in the emirate where the permanent establishment is most closely linked to the service located. For non-established companies, the delivery should be declared in the emirate where the delivery is made.
On September 26, 2022, the President, His Highness Sheikh Mohamed Bin Zayed Al Nahyan, issued Federal Legislative Decree No. 18 of 2022 amending certain provisions of Federal Legislative Decree No. 8 of 2017 on the Value Added Tax Act. The related VAT rules were revised and Cabinet Decision No. 99 of 2022 was issued on 21 October 2022. The revised Value Added Tax Act and related regulations will come into effect on January 1, 2023.
The amended VAT rules require certain taxable persons to report and retain electronic commerce (e-commerce) transactions according to the emirate where supplies are received. Subsequently, on February 22, 2023, Ministerial Decision No. 26 of 2023 on the criteria and conditions for electronic commerce for the purpose of keeping records of the deliveries made was issued. VATP033 was issued where specific reporting requirements for the Emirates were discussed in detail.
Taxable persons supplying goods and services via e-commerce when the value of the supply exceeds Dh100 million over a calendar year are referred to as “qualified registrants” and qualified registrants are required to report standardized supplies made via an e-commerce platform based on the emirate receiving the shipments.
In principle, flat-rate payments must be reported in the emirate in which the taxpayer’s permanent establishment most closely related to the payment is located. If the taxpayer does not have a fixed establishment in the UAE, the supply should be declared in the emirate where the supplier has an establishment in the UAE. If the supplier does not have a permanent establishment and place of business in the UAE, the standard delivery should be declared in the emirate where the delivery takes place. As a special rule, the Qualifying Registrant should report the e-commerce transactions according to the emirate receiving shipments.
If the qualified registrants have mixed shipments, they must prepare a declaration with a split between e-commerce and non-e-commerce shipments for the emirates where there is a mix of shipments. This declaration must be submitted together with the VAT return. The VAT return amount in field 1 is a total amount of e-commerce and non-e-commerce activities for each emirate.
Electronic commerce means the sale of goods or services through any electronic means, electronic platform, social media store or electronic application such as the sale of goods or services through a website, portal, gateway, interface, platform, marketplace , a program interface or a similar application (hereinafter referred to as e-commerce medium) that facilitates the sale of goods or services if all of the following conditions are met:
The goods and services are listed or advertised on the e-commerce medium, thereby providing sufficient information to make an informed decision.
The goods and services are ordered through the e-commerce medium and payment can be made from the e-commerce medium.
Mahar Afzal is a Managing Partner at Kress Cooper Management Consultants. – KT file
In the case of a delivery of goods, the goods are delivered to a location specified by the customer, which location is neither owned nor operated by the supplier.
In the case of provision of Services, the Services will be provided or the Customer will be granted the right to receive the Services with minimal or no human intervention.
If the e-commerce medium acts as an undercover agent (does not disclose the name of the supplier of the relevant goods or services), the supplier is deemed to be the supplier of the goods or services to the e-commerce medium, and the e-commerce medium is a trading medium shall be deemed to be delivery of the same goods or services to the customer. The operator of the e-commerce medium must account for VAT unless the supply is exempt or falls outside the scope, and charge the final consumer the output tax when the supply is standard or zero rate.
Side jobs that support online transactions, such as B. Payment systems, logistics for the delivery of goods and other similar platform services fall within the scope of delivery of goods in e-commerce if they are provided by the same provider.
Once a registrant has been classified as a Qualified Registrant, they must comply with the reporting requirements. The first assessment year is calendar year 2022 (January 1, 2022 to December 31, 2022). If the Dhs100 million threshold is exceeded in calendar year 2022, the qualified registrants must notify the Federal Tax Administration (FTA) for eighteen months from the first tax period beginning on or after July 1, 2023. If the qualifying registrant exceeds the threshold in each subsequent calendar year, eligible registrants are required to report for two years from the start of the first tax period of the calendar year beginning after the date the registrant exceeded the Dhs100 million threshold.
At the end of the reporting period, eighteen months or two years, respectively, the qualified registrants must reassess whether the threshold for the most recently ended calendar year has been exceeded and notify the FTA if it needs to continue using the special reporting mechanism.
Potential Qualified Registrants should assess their earnings each calendar year and comply with reporting requirements accordingly.
Mahar Afzal is a Managing Partner at Kress Cooper Management Consultants. Views are personal and do not represent the official position of the Khaleej Times. If you have any questions or need further clarification, contact Mahar at mahar@kresscooper.com.
