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New VAT recordkeeping requirements for E-commerce transactions

The UAE Ministry of State for Financial Affairs has issued Ministerial Decision No. 26 of 2023 on the Criteria and Conditions for Electronic Commerce for Purposes of Keeping Records of Supplies Made, in response to the need for better control and oversight of e-commerce transactions and tax revenues. The decision requires taxpayers whose e-commerce taxable supplies exceed AED 100 million in a 12-month period to update their internal controls, processes, and systems to monitor and track the location/address details of the customer to prove the Emirate in which the supply is received and report it accordingly in the VAT return.

To clarify the decision, the UAE Tax Authority issued VAT Public Clarification VATP033, which outlines amendments to Article 72 of the UAE VAT Executive Regulations, clarifies what is meant by an Electronic Commerce Medium, and describes how e-commerce transactions should be split into Emirate-wise reporting for purposes of submitting the VAT return.

The new Emirate-wise reporting requirement obliges taxpayers to split all their e-commerce transactions according to the Emirate in which the supplies are received. This will likely improve the allocation of tax revenue generated from e-commerce sales between the various Emirates and allows the Tax Authority to better enforce VAT compliance obligations.

The Public Clarification defines “Electronic Commerce Medium” broadly and includes a range of concepts, such as stores in the metaverse, websites, online marketplaces, smart kiosks, robotic devices, stores in social media platforms, etc., where there is limited human intervention to complete the e-commerce transaction.

The clarification provides factors that taxpayers can take into account to assess the Emirate in which the supply of e-commerce transaction should be reported for VAT return purposes. The place where the supply of goods or services is received is deemed to be the residential address of the consumer for individuals and the place of the establishment most closely connected to the supply for business customers.

Where the Electronic Commerce Medium operates as an undisclosed agent, the supplier shall be regarded as supplying the goods or services to the Electronic Commerce Medium, and the Electronic Commerce Medium operator shall be regarded as supplying the same goods or services to the customer. Therefore, the operator of the Electronic Commerce Medium shall be required to consider the supply to the end customer when determining the value of taxable supplies made by it through e-commerce.

Activities that support online transactions, such as payment systems, logistics for the delivery of goods, and other similar platform services, fall within the remit of an electronic commerce supply of goods provided these ancillary services are provided by the same supplier of the goods. The principles of supply of more than one component as stipulated in Article 4 of the UAE VAT Executive Regulations will apply.

The Public Clarification sets out more details on the calculation of the threshold, which is AED 100 million taxable supplies made through electronic commerce. The new e-commerce reporting obligation is effective from 1 July 2023 or the first tax period following the calendar year in which the AED 100 million threshold was exceeded. This information will be provided as an underlying declaration and split between e-commerce and non-ecommerce standard rated supplies. Sufficient information must be maintained by the qualifying supplier of e-commerce transactions to prove the Emirate in which the supply was actually received.

Taxpayers who are supplying goods and services through an Electronic Commerce Medium should assess whether they fall within the new Emirate-wise reporting mechanism for VAT reporting purposes. The UAE Tax Authority has imposed an obligation on taxpayers who expect to fall within the ambit of this reporting requirement to inform them by 15 March 2023 via email.


This article was published on 02 March 2023

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