Do online sellers based outside the UAE charge UAE VAT?

recipient’s UAE residency and registration status. The supplier should also retain this information for its records and in order to be able to substantiate the application of the reverse charge mechanism in case of a tax audit. If the non-resident supplier cannot ascertain all of the details necessary for the application of the reverse charge mechanism to a supply, such as that the recipient is registered for VAT, then the supplier should register for VAT in the UAE and account for VAT to the FTA itself. 3.4. Sales of goods from outside the UAE Where goods are supplied by the supplier outside of the UAE, the place of supply of the goods is also outside the UAE. Thus, if a supply of goods involves the goods being transferred to the recipient outside of the UAE, the place of supply of the goods is outside the UAE, even if the goods are subsequently imported into the UAE. This means that UAE VAT does not apply to the supply of these goods. This should be contrasted with situations where the goods are first imported into the UAE and then supplied to the recipient – in such situations, the supply of the goods to the recipient is treated as a local supply in the UAE with the place of supply in the UAE. It should be noted that the physical importation of goods into the UAE would typically also trigger the obligation on the importer (either the supplier or the recipient) to account for import VAT. This is discussed in more detail in the next part of this Guide. 3.5. VAT on import of goods into the UAE 3.5.1. Imposition and accounting for import VAT Where goods are imported into the UAE from overseas, the goods will be subject to import VAT at 5%, unless the goods would be either zero-rated or exempt if supplied in the UAE. Import VAT is imposed on the customs value as calculated pursuant to Customs legislation, including the value of insurance, freight and any customs fees and excise tax paid on the import of the goods. Where the determination of such customs value is not possible, then the value can be determined based on the alternate valuation rules stated in the applicable Customs legislation.19 The obligation to account for import VAT is on the “importer”, being the person whose name is listed as the importer of the relevant goods for customs clearance purposes. The mechanism for accounting for VAT on imported goods depends on the VAT registration status of the importer at the time of importation. 19 Article 35 of the Decree-Law. 14

declare it in their VAT return. It should be noted that this “self-accounted” VAT may be able to be recovered by the recipient as input tax in accordance with the normal input tax recovery rules (see Chapter 10). The reverse charge mechanism applies where:      the place of supply is in the UAE; the supply would be subject to VAT in the UAE; the supplier’s place of residence is outside the UAE; the recipient’s place of residence is in the UAE; and the recipient is VAT registered in the UAE. In addition to the conditions set out above, the reverse charge mechanism also applies where a registered person imports goods from outside the UAE. Please see Chapter 9 on imports for more information. The purpose of the reverse charge mechanism is to reduce compliance and the administrative burden of collecting VAT from non-resident suppliers. Furthermore, it puts the recipient in the same position as they would have been if they acquired the goods or services from a domestic supplier, thereby ensuring that domestic UAE suppliers are not disadvantaged by VAT not being collected from purchases from abroad. Example 10 XYZ LLC is a VAT registered business in the UAE. They purchase consultancy services from a law firm located in the UK for AED 30,000. The UK supplier will not charge UK VAT to XYZ LLC but will issue an invoice for AED 30,000. Since the place of supply is in the UAE and the consultancy services would be subject to UAE VAT at 5%, XYZ LLC must calculate the VAT due on the acquired services (AED 30,000 x 5% = AED 1,500). This VAT must be declared by XYZ LLC as output tax in their tax return, as if they had made the supply themselves. XYZ LLC can also consider whether or not they can recover this VAT incurred as input tax in accordance with the normal VAT recovery rules. 28 VAT Guide | Taxable Person | VATG001