E-commerce plays a vital role in the business of both legal experts’ practicing and companies the world around. The VAT, acronym for Value-Added Tax, in UAE and KSA makes the complexities that all stakeholders should be careful of. This article will help you to understand two main concerns that usually result from the perspective of VAT, especially when services or goods are supplied using E-commerce platform.
General Rule for Supplies of Goods
E-commerce is a business in which the transactions of the sales and purchases are conducted electronically. That means everything you are buying or selling online are the business of e-commerce.
If you are in UAE and you are supplying goods or services through the internet or any other electronic media then you will have to pay VAT. If you are a taxable person and you are selling goods via the internet and the goods are delivered locally then you will have to pay a VAT of 5 %.
If you are a VAT registered person then you can charge and collect VAT on all supplies of goods made and services rendered in UAE. You will have to pay the collected VAT to the Federal Tax Authority within 28 days from the end of your tax period. If the value of the supplies reaches AED 3,75,000 then it is mandatory for you to register yourself for VAT.
You will have to maintain the business records if you are a registered person for VAT. You will have to keep all the records of the services and goods imported, as well as all the supplies, all of the tax invoices and alternative documents pertaining to services and goods received, all documents likes tax credit notes and alternative documents that you have received, all tax invoices in UAE and alternative documents that has been issued, all tax credit notes and all alternative documents that have been issued, records of services and goods that have been dispensed or used for matters not concerned to business, indicating taxes that have been paid for the same, records of all services and goods purchased for which input tax that had been not deducted, records of services and goods exported, records of all corrections or adjustments to accounts or all such tax invoices.
Other countries have introduced many other specific measures to collect the VAT and they have their own rules. In UAE, the rules of VAT applicable to the e-commerce business are different. Supplies through e-commerce may have two or at times more parties involved in the transaction. In that case, a supplier or merchant supplies services or goods using the internet, to the customer. In recent years, another party called the third party is a common term often heard of. The marketplace has come to represent the third party to be a participant in the supply.
E-commerce industry now has become a trend over the past decade and after the introduction of VAT throughout UAE (United Arab Emirates) and KSA (Kingdom of Saudi Arabia), E-commerce industry needs to keep in mind the VAT implications of their transactions. Now, it has become very important for all the industries engaged through E-commerce, to collect VAT correctly and they must keep all the details of the business records.