A Brief Guide about VAT on Digital and Electronic Services in UAE

The United Arab Emirates is one of those countries of the world that does not imply direct tax on its public and organizations. It follows value-added tax, which is applicable to a vast range of businesses and services. The condition varies according to the situation. On the other hand, the business of the modern era has also become quite unconventional, which includes a new genre that is digital and electronic services.

What are Digital and Electronic Services?

With the advancement of technology and digitalization, a new category of business has become quite common. The digital and electronic services are the ones that are dealt with through the internet, and there is no direct human intervention. These services are usually offered and provided through the electronic market. Digital and electronic services usually include the supply of the following;

• App

• Online games

• Software

• Cloud storage

• Online music or movies

• Domains or hosting websites

• Advertising space

• Live internet broadcast

• Remote study service

Keep scrolling down this article in-depth to explore a brief guide about VAT on digital and electronic services in the UAE.

Top 4 Scenarios for VAT on Digital and Electronic Services

Digital and electronic services are one of the most popular and progressive business categories in the UAE, which is earning the suppliers considerable revenue. It has been declared as the business category on which VAT is applicable. However, eligibility and application depend on varied conditions, exploring which is critical to avoid penalties.

Here are the top scenarios for VAT on digital and electronic services in the UAE.

Scenario 1:

The first scenario that should be considered for value-added tax on digital and electronic services in the UAE is when the marketing company or the service client is located in the UAE, but the target audience is located somewhere else.

In this case, although the supplier is local, the place of supply is located outside of the borders, so it should not be taxable under VAT. Still, the situation has the tendency of causing confusion; therefore, most electronic service providers hire the best VAT consultancy in Dubai to check their operations for eligibility of tax and ensure to fulfill their responsibility according to law.

Scenario 2:

The second scenario that should be considered in terms of VAT applicability over the digital and electronic service is when the marketing company is located in the UAE, but the service client and the target audience are located outside of it.

In such a scenario, the supplier is again located in the country, but the service is being used outside, so value-added tax will not be applicable on the service provider, as well as the service receiver.

Scenario 3:

The next scenario of value-added tax implication on digital and electronic services in the UAE is in terms of the marketing company, and its target audience is located in the UAE. However, in this scenario, the service provider or client is located outside the UAE.

In this case, the service provider does not have a local setup or establishment, due to which the service will be considered as an export. Moreover, the service is being transactioned and enjoyed locally, so VAT at the rate of zero percent will be applicable to it.

Scenario 4:

The last scenario that requires the attention of authorities dealing with digital and electronic services in terms of value-added tax in the UAE unfolds in the following manner. The marketing company, the client service provider, and the target audience, are all located in the UAE. Since the service is being produced and consumed locally, value-added tax at the rate of five percent will be applicable to the supplier. If you have any confusion, it is better to contact the best VAT consultancy in Dubaiand let the experts explore the rate at which the tax is applicable and fulfill your responsibilities according to law.

Consult the experts for further concerns and queries!

Digital and electronic service has now developed as a vast industry in the UAE. There are various types of supplies in this mode of service. The point which makes the eligibility of value-added tax complicated is that the one-party seeks the service from another party in order to supply it to some third party.

Out of these three parties, some might be located in the UAE and another outside of it. These details impact the type of service, and in return, the eligibility of value-added tax. If you are trapped in any such situation and are confused if you need to pay tax or not, do not make a wrong move due to lack of knowledge. Connect with experts to get professional support in individual cases and maximize your benefits instead of earning penalties.