VAT has been implemented in the state of United Arab Emirates since 1 January, 2018. As the concept of VAT is new for the region, it is bound to impact the online transactions in the UAE. In the past few years, the evolution of online business in the UAE has been significant to an extent that it is not possible for some to imagine life without the ease and facilities that comes with online transactions.
It is important for every business in the UAE selling its products/ services online to understand how VAT impacts online transactions in the UAE. The seller of a particular product/ service should have information about VAT in the UAE and how VAT impact can impact their business transactions.
Let’s discuss how VAT will impact businesses providing goods or services to customers in the UAE.
The important thing to consider for a business selling goods online is the place of supply for a VAT transaction as a business may be selling goods to customers within the UAE as well as outside of it. As per the UAE VAT law the place of supply for a VAT transaction involving supply of goods sold online would be the place where goods are made available for disposal to the customer. This means if you are arranging for the goods to be transported to the customer then the place of supply for the VAT transaction would be the place where the process of transportation begins and normally it is the place where goods are stored or kept.
If the goods sold are being transported to another GCC member state than in a scenario like that the place of supply for the VAT transaction would be the place where the transportation will get terminated.
In case of services, the place of supply for a VAT transaction would be the place where the services are consumed by the customer. In cases, where a business provides services to customers located in a GCC member state, tax liability for the business providing services to the customer will arise in the country where the service provider is registered.
Finally, it is important for E-commerce businesses to obtain knowledge regarding the impact VAT has on such businesses as E-commerce is one of the most growing industries for businesses to venture into in the UAE. The lack of knowledge with regards to VAT laws can lead to businesses facing a number of problems along with fines in the UAE.