The United Arab Emirates has a growing retail market online. If you sell any product or service to customers in the UAE, it’s likely that you’ve already taken the steps to adhere with the local Value Added Tax (VAT) policies. If you haven’t yet, it is high time for you to undergo VAT registration in UAE.
What is e-commerce VAT in UAE?
Value Added Tax on ecommerce sales, including on Amazon, is a percentage of a total cost incurred and paid by a consumer of a product or service. The current standard rate for VAT in UAE is five percent. If your store purchases wood for AED 10 and the VAT charge is 5 percent, you would have to pay AED 10.50 for the wood. AED 10 will be kept by the seller then remit the five percent or AED 0.50 to the government. If you will use the wood in building a table that is valued at AED 100, you’d charge an additional AED 5 for VAT and remit the amount to the Federal Tax Authority (FTA).
VAT is charged at zero percent with respect to the following categories of supplies:
- All exports of products and services outside the GCC member states
- Related supplies of international transportation
- Certain investment grade metals e.g., silver and gold with 99 percent purity
- Supply of healthcare and educational services
To comply with UAE regulations on VAT, online sellers on Amazon and other ecommerce marketplaces are to do the following:
1. Acquire a Tax Registration Number
All B2C and B2B businesses that sell goods and services online to the UAE are required in undergoing VAT registration in UAE. A complete registration will result to the issuance of a tax registration number (TRN) from the local tax authority. The TRN is a unique fifteen-digit number which helps the FTA differentiate a VAT-registered business from others. As per UAE VAT regulations, a registrant is required to mention its TRN in all documents that relate to VAT in UAE. To find more information about importance of branding, you should try Amazon Business Model for Amazon sales
VAT-registered businesses with TRNs issued by the FTA are approved to collect VAT from consumers. The TRN will also be required when claiming back tax paid for purchases of products and services that are for business purposes.
2. VAT has to be collected on all orders that are shipped to the UAE.
All businesses are to collect a five percent VAT at any point-of-sale regardless of the value if it is not qualified for zero rating or VAT exemption. The VAT charge will be based on a good or service’s intrinsic value, excluding insurance, transport and other import taxes which are to be itemized separately.
3. All online merchants supplying to the UAE must remit VAT collected.
All VAT collected from online sales under the registered TRN must be remitted onto the FTA during the VAT return filing in UAE. Submission of VAT returns is mandatory for all VAT-registered businesses indicating the amount that is collected from consumers and other businesses during each accounting period.
The tax period (standard) is quarterly for businesses that have an annual turnover of less than AED 150 million. Taxable businesses with a yearly turnover of more than AED 150 million are to file VAT returns monthly. Failure in filing tax returns in UAE within the timeframe specified by the FTA will make violators liable for fines. This is as per provisions of the Cabinet Resolution (no 40) of 2017 related to Administrative Penalties for all Violations of the UAE Tax Laws.
What are the requirements for VAT registration in UAE?
To apply for the registration of your business for VAT in UAE, gather documents such as:
- Commercial license or business trade license (original and copies)
- Passport and Emirates ID of owners or partners of applicant as reflected in the trade license
- Registration certificate or certificate of incorporation
- Memorandum of association (not compulsory for ecommerce/Amazon sellers)
- Contact details of business, including PO box and complete address
Bank details including account name, account number, bank name, name of the branch, and IBAN
- Declaration of business activities of applicant
- Documentary proof of physical location of business, if applicable
- Expected amount of income and expenses for the following thirty days after VAT implementation and registration
- Income statement of the business for the previous twelve calendar months, signed and stamped
- Documents in relation to import and export, including Customs Registration Number
- Details of activities carried out in other GCC member states
- Details of expected exempt supplies
- Complete list of businesses owned by the partners or owners within the UAE in the last 5 years, including copies of the trade licenses
Do you want to know more about VAT registration and tax regulations in UAE? Consult with the trusted regulated tax agents in Dubai such as VAT Registration UAE today!