Is VAT charged on digital services like apps and streaming to UAE customers?

Article 23 – Telecommunication and Electronic Services 14 1. “Telecommunication Services” means delivering, broadcasting, converting or receiving any of the services specified below by using any communications equipment or devices that transmit, broadcast, convert, or receive such service by electrical, magnetic, electromagnetic, electrochemical or electromechanical means or other means of communication, including: a. Wired and wireless communications. b. Voice, music and other audio material. c. Viewable images. 14 Article amended as per Cabinet Decision No. 100 of 2024. Cabinet Decision No. 52 of 2017 and its amendments – As published by the Ministry of Finance 17 d. Signals used for transmission with the exception of public broadcasts. e. Signals used to operate and control any machinery or equipment. f. Services of an equivalent type which have a similar purpose and function. 2. “Electronic Services” means Services which are automatically delivered over the internet, or an electronic network, or an electronic marketplace, including: a. Supply of domain names, web-hosting and remote maintenance of programs and equipment; b. The supply and updating of software; c. The supply of images, text, and information provided electronically such as photos, screensavers, electronic books and other digitised documents and files; d. The supply of music, films and games on demand; e. The supply of online magazines; f. The supply of advertising space on a website or the rights associated with such advertising; g. The supply of political, cultural, artistic, sporting, scientific, educational or entertainment broadcasts, including broadcasts of events; h. Live streaming via the internet; i. The supply of distance learning; j. Services of an equivalent type which have a similar purpose and function. 3. “Electronic marketplace” means a distribution service which is operated by electronic means, including by a website, internet portal, gateway, store, or distribution platform, and meets the following conditions: a. Which allows suppliers to make supplies of Electronic Services to customers. b. The supplies made through the marketplace must be made by electronic means.

Article 1 1 Definitions in the Federal Decree-Law No. 8 of 2017 referred to shall apply to this Decision, and other than this, the following words and expressions shall have the meanings assigned against each, unless the context requires otherwise: Decree-Law : Federal-Decree Law No. 8 of 2017 on Value Added Tax, and its 1 Article amended as per Cabinet Decision No. 100 of 2024. Cabinet Decision No. 52 of 2017 and its amendments – Unofficial translation 1 Standard rate Legal Representative : : Direct Export : Indirect Export : Overseas Customer : Notification : Business Day : Virtual Assets : amendments. The Tax rate specified in Article 3 of the Decree-Law. The guardian or custodian of an incapacitated person or minor, or the bankruptcy trustee appointed by the court for a company that is in bankruptcy, or any other Person legally appointed to represent another Person. An Export of Goods to a destination outside of the Implementing State, where the supplier is responsible for arranging transport or appointing an agent to do so on his behalf. An Export of Goods to a destination outside of the Implementing State, where the overseas customer is responsible for arranging the collection of the Goods from the supplier in the State and who exports the Goods himself, or has appointed an agent to do so on his behalf. A Recipient of Goods who does not have a Place of Establishment or Fixed Establishment in the State, does not reside in the State, and does not have a Tax Registration Number. Notification to the Person of decisions issued by the Authority through one of the means stated in the Tax Procedures Law and its Executive Regulation. Any day of the week, except weekends and official holidays of the Federal Government. Digital representation of value that can be digitally traded or converted and can be used for investment purposes, and does not include digital representations of fiat currencies or financial securities. Title Two – Supply

2. Overview: e-Commerce and VAT 2.1. What is e-commerce? In traditional commerce, goods and services are usually supplied from a physical location, such as a shop or office, with the supplier and the recipient usually present in the same location. E-commerce (also known as “electronic commerce” or sometimes loosely referred to as the “digital economy”) generally refers to supplies of goods and services over the Internet or a similar electronic network, with goods and services being sourced or supplied by electronic means, such as through a computer, phone website or electronic applications. This Guide discusses the following types of transactions: • • goods purchased through an electronic platform; and services supplied by electronic means. It should be noted that many of the general VAT rules also apply to e-commerce transactions. There are, however, a number of additional VAT rules which are intended to apply specifically to e-commerce arrangements. The remaining part of this Chapter provides an overview of general VAT rules which affect most types of supplies, including supplies of goods and services made in the context of e-commerce. 2.2. Legislative background UAE VAT is governed by the Decree-Law and the Executive Regulation. It should be noted that VAT legislation contemplates special rules for cross-border supplies of goods and services between the UAE and “Implementing States”, which are the GCC States that are implementing a VAT system. At the current time, none of the GCC states are considered to be Implementing States for the purposes of the UAE VAT. As a consequence, this version of the Guide does not cover special rules applicable to supplies with Implementing States. 2.3. What is VAT? VAT is a transaction-based indirect tax, which is charged and collected at each stage of the supply chain by legal and natural persons (“persons”) which meet the requirements to be registered for VAT. Thus, persons which are either registered or are required to register for VAT (known as “taxable persons”) charge VAT to their customers on taxable supplies of goods or services. A taxable supply is defined in the VAT legislation as a “supply of goods or services for a consideration by a person conducting business in the UAE, and does 4

Incurred VAT therefore may represent a large irrecoverable cost to businesses involved in making supplies which are wholly or partly exempt from VAT, such as those operating in the financial services sector. As codified in the UAE Law and in conformity with its obligations under the GCC VAT Agreement, the UAE has taken a very narrow approach to the use of VAT exemption. Thus, the UAE will tax the majority of transactions taking place in the country at the standard rate, whilst only a very limited number of exceptions to this general rule will be made. These exceptions will include some financial services, subject to certain conditions, as outlined below. 3.3 Multiple supplies versus single composite supplies A business will make multiple supplies where it charges a single inclusive price for a number of separate supplies of goods or services. This is different from a single supply of a mixture of goods or services (known as a single composite supply) to which a single rate of tax applies. These scenarios can apply to financial services which may be packaged or ‘bundled’ together where they would ordinarily be treated as separate services or in the opposite situation, where a single composite supply may be unbundled or artificially split into separate components. 3.3.1 Multiple supplies Where you make a multiple supply, you must determine the correct amount of VAT to charge. If you make supplies and individual supplies are: Liable to VAT at the same rate Not liable to VAT at the same rate the Then you should: Calculate the tax that is due in the normal way Work out the tax value of each supply in order to calculate how much tax is due Where the individual supplies are not liable to VAT at the same rate, you must use a method of valuing each supply which is fair and reasonable. This could include using the cost of each element of the supply as a proxy for assigning a value to each component of the supply. The value of each supply must be disclosed to the customer. 8 VAT Guide | Financial Services | VATGFS1