“Navigating the New UAE VAT Landscape: Special Reverse Charge Mechanism for Electronic Devices”

Cabinet Decision No. 91 of 2023, as published in Official Gazette Issue No. 758 on August 30, 2023, brings forth a special reverse charge mechanism for local electronic device supplies. This decision outlines the conditions and prerequisites for implementing VAT through this reverse charge system. It will come into effect 60 days after its official gazette publication, starting from October 29, 2023.

In this context, an “Electronic Device,” as defined by the new decision, encompasses mobile phones, smart phones, computers, tablets, and their associated spare parts.

The key elements of this decision concerning the application of VAT to electronic device supplies are as follows:

When a supplier provides electronic devices to a registered recipient within the UAE, with the intention of resale or electronic device production, the following rules apply:

• The supplier is exempt from calculating VAT for the electronic device supply and should not include it in their VAT return.
• The recipient of the electronic devices is responsible for calculating VAT based on the device’s value and must fulfill all relevant VAT obligations regarding the supply, including VAT calculation.

To apply this special reverse charge mechanism, the following requirements must be met:

• The recipient of electronic devices must furnish the supplier with a written declaration, before the supply date, stating their intention for the electronic device supply and their VAT registration with the Federal Tax Authority.
• The electronic device supplier must receive and retain the declaration provided by the recipient and verify the recipient’s VAT registration through methods provided by the Federal Tax Authority.

Key Takeaway:

Taxable individuals engaged in the electronic device supply business should thoroughly assess the VAT implications of this newly introduced special reverse charge mechanism. They must make the necessary adjustments to their systems and processes to comply with these changes effectively.

Engaging the services of a professional accounting firm is advisable when dealing with transactions subject to Reverse Charge Mechanism (RCM) provisions. Such a firm should possess the capability to maintain meticulous transaction records, ensure precise VAT filing for RCM transactions, facilitate VAT claims through the requisite forms, and oversee the organization and retrieval of import records. For further information and assistance, please get in touch with the VAT analysts at Trustworth.