How is the VAT applied on the e-commerce business in the UAE?

All of us know that e-commerce has become very popular with the passage of time. Hence, it has become very important to understand how VAT is applicable on e-commerce businesses. It is not easy to determine how VAT is applicable to e-commerce business unless and until the top VAT service providers in Dubai are present to help you. To those who are unaware, e-commerce means selling goods and services through digital platforms. In the last few years, almost everyone has started using the Internet, and this has boosted the e-commerce business.

There are some important factors that need to be considered such as - The residence of the seller, the location where sales is taking place, the user of the goods and the place where goods will be used. It is important to determine the actual use of the electronic service. There are other technical factors to consider such as where did the recipient use the electronic service. If the sales are happening locally, a standard rate of 5% will be applicable on such products that are purchased in the United Arab Emirates through the online platform or through the market.

Those who are not fully familiar with accounting and VAT-related rules must approach professional experts. It is also important to know about the Article (18) of the Decree-Law. This states that a non-resident has to register for the tax, and there will be no threshold limit applicable to the non-residents. In simple language, it means that if a customer in the UAE is purchasing a product or service from an online platform such as e-commerce, social media, education, fashion, art, music, games or any other servic, then the non-resident should register for the VAT within the stipulated time. It is important to comply with the local tax registration. Failing to comply with laws can cause serious trouble for the business.

Rules regarding the application of VAT

  • If there is a sale and purchase of services/goods through e-commerce within the UAE, it will be applicable at 5%.
  • If goods and services are taken in the United Arab Emirates, and they are registered for the VAT, then, who has registered for VAT will make a calculation at a standard 5% rate in reverse charge mechanism. This means that instead of suppliers, the buyer will pay for the VAT.
  • It is important to register for the VAT after touching the figure of 375000 AED.
  • In e-commerce business, it is important to determine where the service is being used. If it is within the UAE, the place of supply is within the UAE, then VAT will be charged at a standard rate of 5%. In case the place of supply is outside the UAE, then no VAT will be applicable.

Consult with the best accounting & bookkeeping firms in UAE for further information and details. It will help you to manage your business in a hassle-free manner.

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