VAT Guide for E-Commerce in UAE -AM Audit | Audit Accounting Firm in Dubai
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2022/08/02

VAT Guide for E-Commerce in UAE

VAT taxes are one of the biggest challenges that e-Commerce businesses in the UAE face. They collect the tax from their customers and then deposit it with the government.

However, this is one of the most complex tax laws. Doing it wrong can cause fines, penalties, and even jail time.

Before considering doing business in the UAE, you need to know more about VAT from a tax perspective. If you want to learn about the laws that pertain to digital commerce in the UAE, this article is for you.

VAT in UAE: How Does it Work

VAT is a kind of indirect tax. The way VAT works is that the price of a product or a service is not just the price tag we see on the shelf, but it results from the sum of several costs.

These costs include an added value. For example, if you buy an item for 100 AED and the item costs 100 AED at a store, but added with 20 AED of taxes or commissions, then the ultimate price is 120 AED.

 

Selling on Amazon

As a domestic seller, under UAE VAT Laws, you may either be required to register mandatorily or may do so voluntarily. If you are VAT registered, you should provide Amazon with your TRN number.

In the UAE, the government requires resident sellers to pay 5% VAT on every item sold on Amazon. This means that if an item costs AED 100, and you sell it for AED 111, then you pay AED 5 to the government as a VAT.

If your business is under the federal tax authority, you can upload your ID. But if you’re not registered, you will pay VAT on each item you purchase on the platform.

It applies to all electronic items, like mobiles, tablets, and laptops. The only exception is books that don’t have any value-added tax by the manufacturers but are still subject to other taxes.

A non-established business selling goods from the UAE shall be subject to a NIL VAT registration threshold. VAT registration will be effective from the date on which you started making sales in the UAE.

It is the responsibility of each Amazon Marketplace seller to ensure that they are VAT-compliant. You should seek professional advice if you are unsure of your obligations under VAT Laws.

 

Selling on Noon

Noon is an online shopping website. Noon e-commerce company was established in 2016 with funding from the Saudi Public Investment Fund.

It is an e-commerce platform that allows merchants and business owners to sell their products online.

If you are not VAT registered, you can still conduct business at Noon by completing the declaration form. As a result, they will charge VAT for all transactions you make as a vendor.

VAT is in the price of all goods and services available to VAT registered users. Unregistered VAT users can exclude VAT from their price options.

 

Selling on Shopify 

Shopify is a software application that allows you to create your online store. You can use it to sell products online and take payments, including PayPal and credit cards.

Shopify charges VAT tax on the total amount paid for an order, including shipping and taxes. Shopify does not charge VAT tax on the price of individual items in an order.

Shopify collects VAT at the time of order and charges it to your customer’s country of residence. The amount charged reflects the current rate.

 

Conclusion

E-Commerce is growing in the UAE and with it the need to understand and adhere to all regulations surrounding VAT.

If you are looking to start an eCommerce business in the UAE, you first need to register and get a valid TRN number.

Once you have a TRN number, you will be legally obligated to collect and pay VAT on all the taxable goods you sell in the UAE. This is where AM Audit comes in.

We ensure you follow all regulations and do not fall into any legal trouble. For more detailed information, please visit https://www.amaudit.ae/expert-team/

 

Expert Team

  • Sandeepani

  • Senior Financial Auditor
  • Adel Farag

  • Taxation Manager
  • Mohammed A

  • Accounting and tax Associate
  • Sohaib Basharat

  • Financial Auditor & Tax Manager

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