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What you need to know now
Online selling does not create a separate VAT exemption. Analyse the supply, supplier and customer, then apply the relevant place-of-supply and reporting rules.
- Separate goods from electronically supplied services.
- Check non-resident obligations rather than assuming a turnover threshold.
- Determine the Emirate reporting basis where the e-commerce rules apply.
Identify what the online transaction supplies
An online order is a sales channel, not a VAT classification. Separate physical goods from services and electronically supplied services, then identify the supplier and customer in the contract. A platform may sell in its own capacity or facilitate another business’s sale; settlement into a platform wallet does not answer that question. Review the terms shown to customers, merchant agreement and invoice before deciding how the transaction belongs in the VAT records.
Keep location evidence with the transaction
For goods, connect the order to delivery and import or export evidence. For relevant services, retain the customer-location information that supports the treatment used. Preserve the original data rather than relying only on a dashboard total that may later change. Cross-border transactions need particular care: a foreign supplier should not assume the resident turnover threshold automatically applies, and a UAE customer should assess whether it has an accounting obligation for purchased services.
Reconcile gross sales and platform deductions
A marketplace payout commonly combines several components. Build a reconciliation from gross orders through cancellations, refunds, commissions, payment fees and the final cash settlement. For example, a payout lower than invoice totals may reflect the platform’s charges rather than a reduction in the value of customer supplies. Keep the platform’s fee invoice and the customer-sales record separate so the VAT return follows the actual transactions rather than simply reporting the cash received.
Review reporting and system fields
Where the special e-commerce Emirate-reporting rules apply, verify the reporting basis using current FTA instructions and capture the required information at source. Do not apply a general office-location shortcut to every online sale. Assign responsibility for exceptions such as incomplete addresses, returns and amended orders. Periodically sample orders back to contracts, delivery records and ledger entries, especially after changing marketplaces, fulfilment arrangements or the business entity operating the online store. Test one completed order, one refund and one overseas transaction when checking a new platform integration; these examples reveal different accounting gaps.
YOUR NEXT STEPS
A practical way forward
- 01
Step 1
Map the sales channel and contracting entities.
- 02
Step 2
Capture customer location and delivery evidence.
- 03
Step 3
Reconcile platform settlements and invoices to the VAT return.
CLEAR ANSWERS
Frequently asked questions
Do online sales escape VAT?
No. The underlying supply determines treatment.
Does a foreign platform always register because a sale occurred?
Assess whether another person accounts for the tax and the applicable supply rules.
Earlier article & background First published 13 August 2020 · retained for context
This earlier article is preserved for context. Its rates, deadlines, approvals and announcements may have been superseded. Use the current guidance and official references on this page for your next step.
FTA Updates – VAT on e-commerce services
FTA Updates – VAT on e-commerce services
FTA Updates – VAT on e-commerce services : FTA clarifies VAT application for e-commerce. The UAE’s e-commerce has been growing exponentially over the last few years.
FTA Updates – VAT on e-commerce services: The UAE’s Federal Tax Authority (FTA) on Wednesday further clarified that though five per cent value-added tax (VAT) will be applicable to general e-commerce purchases however there are a number of special rules that apply specifically to e-commerce transactions.
It said the tax will also be applicable on digital services including supply of domain names, web hosting and remote maintenance programmes and equipment, software, images, text and information provided electronically such as pictures, screen savers, electronic books, documents and other digitized files such as music, movies and games on demand and online magazines.
Other services identified under the banner of “electronic services supplies” include the supply of advertising space on a website and the rights associated with that advertisement, and political, cultural, artistic, sports, scientific, educational or entertainment broadcasts, including broadcasts of events, live streaming via the internet, the supply of distance learning services, and services of any equivalent type that have a similar purpose and mission.
The growth of e-commerce sector picked up even further in the wake of corona virus pandemic with UAE residents on average spending over Dh6,000 a year.
In light of the increasing importance of the e-commerce sector, clear mechanisms for procedures have been identified. Value-added tax, as it relates to the supply of goods and services through electronic means, contributes to supporting the activities of this vital sector, which depends on a locally developed digital and technological infrastructure.
It added that taxable persons should charge VAT to customers when supplying taxable goods or services at the standards rate of 5 per cent or at a rate of zero per cent where law permits. If the supplies are exempt from tax, these supplies are not treated as a taxable supplies and therefore no VAT needs to be charged on these supplies.
FTA Updates – VAT on e-commerce services : As per the Article (18) of Decree Law, a non-resident shall register for tax and makes supplies of goods or services, there is no threshold limit applicable to the non-residents.This means if a consumer in the UAE buys a service/product from an online platform (social media, e-commerce, education, games, arts, fashion, music or any other services), the non-resident shall register for the VAT within the stipulated time and comply with local tax legislation.
As per the UAE legislation, the place of supply of electronic services shall be UAE if the use and enjoyment of the supply is within the country. Pursuant to Article (31) of the Decree law, provision of electronic services are subject to tax.
Learn More : E-Commerce – VAT Guide – EN – 09 08 2020
Courtesy : Khaleej Times
VERIFY THE DETAIL
Official sources & further reading
Source checks support this general guide. Your treatment depends on the facts, tax period and applicable legislation.
