“Keeping Pace with Change: UAE’s New VAT Recordkeeping Rules for E-Commerce Transactions”

In response to the need for better control and oversight of e-commerce transactions and tax revenues, the UAE Ministry of State for Financial Affairs issued Ministerial Decision No. 26 of 2023. This decision introduces a new reporting requirement for taxpayers with e-commerce taxable supplies exceeding AED 100 million in a 12-month period.

Following this decision, the UAE Tax Authority issued VAT Public Clarification VATP033, which outlines amendments to Article 72 of the UAE VAT Executive Regulations. It clarifies the concept of an Electronic Commerce Medium and provides guidelines for Emirate-wise reporting of e-commerce transactions in VAT returns.

Key takeaways from the new reporting requirement include:

• Taxpayers with significant e-commerce supplies must assess if they fall within the Emirates’ reporting mechanism for VAT purposes.
• Internal controls, processes, and systems should be updated to monitor customer location details for Emirate-wise reporting.
• Taxpayers expecting to meet the reporting requirement must notify the UAE Tax Authority by March 15, 2023.

The new requirement enhances the allocation of tax revenue from e-commerce sales among Emirates and strengthens VAT compliance enforcement.

The Public Clarification defines “Electronic Commerce Medium” broadly, encompassing various platforms with limited human intervention. Factors are provided for taxpayers to determine the Emirate in which e-commerce supplies should be reported in VAT returns.

In undisclosed agent scenarios, both the supplier and operator are obligated to undertake Emirate-wise reporting. Incidental supplies supporting online transactions are considered electronic commerce supplies when provided by the same supplier of goods.

The threshold for the reporting requirement is AED 100 million in e-commerce taxable supplies in a 12-month period. The reporting obligation becomes effective from July 1, 2023, or the first tax period after exceeding the threshold.

Taxpayers expecting to meet the reporting requirement must inform the UAE Tax Authority by March 15, 2023.