How Do Electronic Services Get Affected by VAT In UAE?
How Do Electronic Services Get Affected by UAE VAT?
A vital component of international trade, the digital economy is still expanding. However, it can be difficult to apply Value Added Tax (VAT) to digital services, particularly if they are provided overseas. The UAE VAT Law categorizes digital services as electronic services and contains special rules to handle their complexity. Electronic services are defined as “services automatically delivered over the internet, or an electronic network, or an electronic marketplace” under Article 23 of Cabinet Decision No.52, 2017.
Companies must determine if the services they provide fall under the category of “electronic services” and how they will be handled under the UAE’s VAT legislation. For a precise evaluation of how VAT applies to electronic services, you can speak with VAT consultants in Dubai. In order to help you effectively fulfill your VAT compliance duties, we want to offer our knowledge of how electronic services are treated by VAT in the United Arab Emirates in this post.
Which Supplies Are Included in the "Electronic Services" Category?
To ascertain whether your supply meets the requirements for being classified as an electronic service, you must adhere closely to the definition provided by the law. It is important to remember that in order for a service to be categorized as electronic, it must be given automatically. It implies that an automated system should be used to supply the service. The following services are listed by the law as being provided electronically:
- The delivery of web hosting, domain name supply, and remote program and equipment maintenance
- The delivery and maintenance of software;
- The distribution of text, graphics, and information in the form of electronic books, screensavers, photographs, and other digital documents and files;
- On-demand access to games, movies, and music;
- The availability of periodicals online;
- The distribution of online advertising space and any rights pertaining thereto;
- The distribution of transmissions pertaining to politics, culture, the arts, sports, science, education, or entertainment, including event broadcasts;
- Internet-based live streaming;
- The availability of distance education;
- Services of a comparable kind with a comparable goal and function
Location of Electronic Services Supply
To find out if a supply would be subject to UAE taxes, you must establish the place of supply. Article 31 of the Federal Decree-Law No.8 of 2017 on Value Added Tax (also known as “the Decree Law”) lays forth special guidelines for determining the location of supply for electronic and telecommunication services. To precisely ascertain the place of supply, it is advised to speak with VAT consultants in Dubai. According to Decree Law Article 31, the Place of Supply will be
- In the State, to the degree that the supply is used and enjoyed there.
- Outside the State, to the degree that the supply is used and enjoyed outside the State.
Furthermore, regardless of the location of the contract or payment, the actual use and pleasure of any electronic and telecommunications services will be where they were utilized
UAE's VAT Treatment of Electronic Services
Whether or not electronic services are liable to VAT in the United Arab Emirates depends on where they are supplied. There won’t be any UAE VAT if the supply is made outside of the country. Nonetheless, the supply will be subject to UAE VAT if it is located in the UAE. In the United Arab Emirates, a taxable supply of services has a default VAT rate of 5%. You can evaluate the proper VAT treatment of electronic services with the assistance of VAT advisors in Dubai.
Could the UAE VAT Zero-Rate Electronic Services?
If certain requirements are met, the supply of electronic services may be zero-rated. The requirements for determining whether an electronic service can be zero-rated are outlined in Article 31 of the Executive Regulations. According to this clause, an electronic service may receive a zero rating instead of the usual 5% rating. If an electronic service supply satisfies the following requirements, it may be zero-rated:
1) The services are provided to a recipient who is outside the state at the time of the services and does not have a place of residence in an Implementing State.
2) The Services are not directly related to any real estate located in the State, any improvements made to the State’s real estate, or any movable personal assets located in the State at the time of the Services.
For taxable individuals, the VAT treatment of electronic services might be complicated. However, with the assistance of Dubai VAT consultants like IBR Group UAE, it can be made simpler. Serving clients from a variety of industries, we are among the best tax consultants in Dubai. The Federal Tax Authority (FTA) has authorized and registered IBR Group UAE tax agent in Dubai. Strong VAT services, including VAT accounting, VAT filing, VAT refunds, and VAT reconsideration, are among the things we can offer in Dubai. If you need assistance with any tax-related issues, speak with us.