The United Arab Emirates Introduces New E-commerce Related VAT Obligations

The United Arab Emirates (UAE) has introduced new e-commerce reporting and record-keeping obligations for resident taxpayers. These obligations, published in an amendment to the UAE VAT Executive Regulation, change the sourcing rules for e-commerce supplies made by residents in the Emirates. Amendments to the voluntary disclosure procedure have also been enacted.

Timeline

The new reporting and record keeping obligations are applicable from July 1, 2023, or the first tax period following the calendar year in which the threshold was exceeded.

• Taxpayers that meet the threshold should be subject to the e-commerce reporting obligation for a set time period.
• For taxpayers that have exceeded the threshold during year 2022: 18 months from the first tax period on or after July 1, 2023
• For taxpayers that have exceeded the threshold after calendar year 2022: two years from the first tax period of the calendar year following the year the taxpayer has exceeded the threshold
• After this time period, whether it be 18 months or two years, the taxpayer should re-assess whether it has met the threshold in the calendar year that has just ended.

The voluntary disclosure rules will be applicable from March 1, 2023.

Impact

Reporting and Record keeping obligations

According to the amended provisions, resident taxpayers will be required to report and keep records of taxable supplies to the Emirate where the supplies are received, when the total value of supplies made through e-commerce exceeds 100 million UAE dirham (approximately 27 million USD) per calendar year. Currently, resident taxpayers are required to report taxable supplies in the Emirate in which the taxable person’s establishment that is most closely related to the supply, is located. The UAE Federal Tax authority has published additional guidance on this amendment in VAT Public clarification VATP033.

There are no changes to reporting requirements for non resident taxpayers.

Voluntary Disclosure obligations

In addition, effective March 1, 2023, the UAE will change the voluntary disclosure obligation for taxpayers. As of this date, the UAE will require a voluntary disclosure for reporting errors, regardless of error amount. Currently, the threshold is 10,000 UAE dirham (approximately 2,700 USD) for errors resulting in incorrectly calculated VAT. The voluntary disclosure covers tax returns, tax assessments and tax refund applications. It is irrelevant whether the error causes any tax difference.

The voluntary disclosure rule applies to all taxpayers, not just to e-commerce service providers.

Compliant VAT reporting will be essential. With the updated voluntary disclosure obligations, companies with errors will be in the tax authority’s spotlight.