Criteria and conditions for Electronic Commerce for the purpose of the amendment to Emirates’ reporting of VAT

Ministerial Decision No. 26 of 2023 on the Criteria and Conditions for Electronic Commerce for the Purposes of Keeping Records of the Supplies Made was released by the Minister of State for Financial Affairs on February 22, 2023.

Public Clarification VATP033

On February 24, 2023, the FTA released Public Clarification VATP033 to make it clear that the Electronic Commerce Medium encompasses a wide variety of ideas, including stores in the metaverse, intelligent kiosks, robotic gadgets, etc.

It also explains which factors should be considered to determine which Emirate the supply of goods or services must be reported in and offers examples and clarification on the criteria and conditions outlined in Article 3 of the Decision: “The Emirate in which the services are received, shall be determined in accordance with the relevant factors.” (FTA will accept the place of residence of the customer taking precedence over, for example, billing address or IP address).

For the supply of goods, the Emirate in which the goods are received, shall be determined by the location specified by the customer, taking precedence over place of residence, billing address or IP address.

Undisclosed Agent & Incidental Supplies

The Public Clarification explains that if an Electronic Commerce Medium (ECM) is an undisclosed agent and liable to pay VAT, then the supplier will be considered to have provided goods or services to the ECM, and the ECM will be considered to have provided the same goods or services to the end customer. Therefore, when calculating taxable supplies made through e-commerce, the ECM operator must  consider the supply to the end customer.

In the case of incidental supplies, such as payment systems and logistics, which support online transactions, they will be considered part of the electronic commerce supply of goods if they are provided by the same supplier of the goods. The calculation of the threshold of 100 million AED of taxable supplies made through e-commerce, reporting obligations, and timelines are also explained in more detail in the Public Clarification, using the principles of supply of more than one component as set out in Article 4 of the UAE VAT Executive Regulations.