Maintenance of Electronic Data for VAT purposes

Ministerial Decision No. 26 of 2023 stipulates the conditions and criteria for conducting electronic commerce business for the purpose of keeping delivery records. The requirement is applicable to taxable persons whose e-commerce taxable supplies are more than 100 million AED in a financial period of 12 months (calendar year). Therefore, it is advisable for e-commerce businesses to seek the services of top Tax Consultants in UAE to seamlessly implement VAT tax requirements and to stay compliant, with the impact of VAT on small businesses.  

Relevant e-commerce activities

Assets that can be supplied, such as but not restricted to water, land, and all types of energy. Other than goods, anything else that can be supplied and a person who provides goods or services. A website, interface, portal, make, gateway, platform, program interface, or other comparable application that supports the sale of products or services, including electronic methods, electronic platforms, a shop on social media, and similar applications.

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Purpose and Conditions of E-commerce

As per Ministerial Decision No.26 of 2023, for the purpose of keeping track of the supplies made, there are certain requirements and conditions for using electronic commerce. Article 2 of the Ministerial Decision defines the purpose and conditions of electronic commerce. The supply of goods and services qualifies as an investment if the supply of goods and services is made electronically through electronic commerce. For taxpayers who offer goods and services through an internet commerce channel, determining whether they must report VAT according to the new Emirates' reporting guidelines is crucial.

• A taxpayer's internal controls, operating procedures, and customer monitoring systems must be updated when they make taxable supply through an electronic commerce channel worth more than AED 100 million in a calendar year.
• Identifying the Emirate in which the supply was received and properly
• The products and services are advertised or listed on an electronic commerce platform (this is true if there is enough information provided to support a purchase, such as a product description, price, and availability).
• In the case of delivery of the goods, the goods are delivered to the place specified by the customer, but this place is not owned or operated by the supplier (this requirement is not met if the order is executed entirely on the online platform)
• When products are supplied, they must be delivered to a customer-specified location that is neither owned in the case of a supply of services, nor the services are offered or the customer given the right to receive them;
• There must be little or no human involvement in the provision of services, and the services must not be owned, controlled, or operated by that supplier (picking up goods at the supplier location will not satisfy this requirement) or operated by the supplier.
• When services are supplied, the client either receives the right to receive the services or the actual services.

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If all of the following conditions are met, the supply of goods and the provision of services would be considered to be the supply of electronic services via an electronic commerce medium. Due to the new UAE Emirate-wise reporting requirement, taxable persons are now required to segment all of their e-commerce transactions in accordance with the Emirate in which the supplies were received. This enables the Tax Authority to enforce VAT compliance requirements more effectively and is likely to improve how tax revenue from e-commerce sales is distributed among the various Emirates. 

Choose Tax Consultants UAE

Essentially, it is advisable for e-commerce businesses to seek the services of top Tax Consultants in UAE to seamlessly meet and implement tax requirements and to stay compliant, to which noncompliance accrues hefty fines. Therefore, contact us today and we shall be glad to assist you.