The Ministry of Finance (MoF) issued a Ministerial Decision on the Criteria and Conditions for Electronic Commerce for Record Keeping of the Supplies Made.
On 22 February 2023, the Minister of State for Financial Affairs issued Ministerial Decision No. 26 of 2023 on the Criteria and Conditions for Electronic for electronic commerce for record keeping of the supplies made. This new reporting requirement is applicable for taxpayers whose e-commerce taxable suppliers exceed AED 100 million in a 12-month period (i.e., calendar year). They need to keep records of e-commerce transactions according to the Emirate in which these supplies are received.
Criteria and Conditions for Electronic Commerce
This Decision sets out the criteria and conditions for electronic commerce according to the provisions of Clause 5 of Article 72 of the Executive Regulation.
A supply of Goods and Services shall be considered to be an electronic commerce supply made via an Electronic Commerce Medium where all of the following criteria and conditions are met:
- The Goods and Services are listed or advertised on an Electronic Commerce Medium;
- The Goods and Services are ordered through the Electronic Commerce Medium, regardless of whether the payment is made online or not;
- In the case of a supply of Goods, the Goods are delivered to a location specified by the customer whereby this location is not owned by the supplier nor operated by that supplier.
- In the case of a supply of Services, the Services are provided, or the right to receive the Services is granted to the customer with minimal or no human intervention.
VAT Public Clarification VATP003
In addition, the UAE Federal Tax Authority (“FTA”) published Public Clarification VATP033 clarifying the amendment to Emirates’ reporting of VAT.
The Public Clarification that defines an electronic commerce medium such as stores in the metaverse, websites, online marketplace, smart kiosks, robotic devices, store in social media platforms etc., where there is limited human intervention to complete the e-commerce transaction.
It furthermore provides examples and clarification on the criteria and conditions stipulated in Article 3 of the Decision and explains which factors should be taken into account to determine in which Emirate the supply of goods or services must be reported :
- 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
The Public Clarification clarified that in terms of VAT liability, 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 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.
Incidental supplies
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.
Timeline and Threshold for Qualifying Registrants
From 1 July 2023, Qualifying Registrants, including registrants acting as undisclosed agents, are required to notify the FTA via box 1 of the VAT Return to be submitted after exceeding the AED 100 million threshold. At notification, the Registrant is required to also confirm the date when the AED 100 million threshold was exceeded.
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