The digitalization process has made it possible for the creation of multiple online e-commerce platforms like Amazon and other SaaS companies. This technology has made it easier for people to shop online from the comfort of their homes. It has given an amazing opportunity for people to start their own business without having to store a large inventory.
However, amidst the increasing sales and ROI, e-commerce business owners must take care of legal obligations, just like any other physical business. Apart from regular income taxes, they also need to take care of VAT registration in UAE and ensure compliance with FTA rules and regulations.
A Complete VAT Registration Guide for e-commerce Companies in UAE
Do you have an online e-commerce store or an Amazon company and are wondering about VAT guidelines? If yes, then you are in luck because we have brought you a complete VAT registration guide that will help you with your e-commerce business registration in UAE.
VAT Registration Threshold for E-commerce Companies in UAE
In the case of physical stores, if the business turnover is AED 375,000 or more, the company has to register for VAT in UAE as per the Federal Tax Authority (FTA) guidelines. In such cases, a standard VAT rate of 5 percent is charged on all goods and services sold in the UAE.
Similarly, in the case of online e-commerce stores, all goods sold are to be charged with the standard VAT rate, i.e., five percent in the UAE. If you have an online e-commerce store of an Amazon company, then make sure to display your tax registration number (TRN) on your website, so your customers know that you charge VAT, and the prices are inclusive of VAT.
What are VAT Charges for the supply of Goods/ Services over the Internet?
In UAE, according to the FTA, the medium of the transaction of goods/ services doesn’t affect its tax status. All physical goods and services sold online are subject to a standard VAT rate of 5 percent if the business selling it is VAT registered, and the supply is made within the UAE. The supply of such goods is to be treated like the sale of physical products and services.
If you sell goods that are delivered locally, then a standard VAT rate is charged. However, if the supply of goods is to any non-implementing state outside of UAE, then such supply is considered as zero-rated. In such cases, the company needs to keep all the paperwork and evidence of the export of products to present it to the FTA.
Whether VAT is standard or zero-rated on the supply of goods depends upon the destination of delivery of such goods. If you are confused, do consider contacting the best VAT consultancy to get details about all products related to your business.
Example: If an online e-commerce company X sells musical equipment online through the Internet. Company X has to charge fiver percent VAT on the sale of musical equipment when they are delivered to a local destination. If, however, a guitar or a violin is exported outside UAE to a customer living in a country that doesn’t implement VAT, then it is considered as zero-rated. If you are using a courier service for exporting the products, then make sure to keep all the invoices and receipts as proof of export.
All Required Business Records
Just like physical stores, all VA registered e-commerce companies in UAE need to maintain all the transactions and invoices that must be submitted to the FTA as proof. Some of the required documents that need to be maintained include:
- Records of all supplies and export of goods and services online
- All tax invoices and documents related to products sold.
- All tax invoices and documents related to goods received.
- Records of goods and services exported (includes invoices from courier service is used).
- Records of adjustments/ corrections made to the accounts or tax invoice.
For VAT registered e-commerce stores, the tax invoices that must be maintained should include the following details:
- Date of issue of the tax invoice
- Online company name (as mentioned in the legal documents), Tax Registration Number (TRN), address of the company.
- Name, address and TRN of the buyer if available
- Description of goods or services supplied/ sold
- Date of supply (if different from the date of issuance of tax invoice)
- Gross amount that is paid by the buyer (the amount should be in AED)
- Any discount if offered and the total amount after discount.
Register Your E-commerce Businesses in UAE
Registering your online e-commerce business may seem like a complete hassle, especially if you are new to a VAT registration in UAE. However, if you’re running an online store and meet all the criteria, then you must approach a local best VAT consultancy in Dubai and get yourself registered for VAT in UAE. With the help of these professionals, you can rest assured that your company will comply with tax laws. These experts can also help you with your online business set-up and get everything in order. Happy VAT filing!