Thanks to the fulfillment program of Amazon, similar eCommerce platforms, and the simplification of the shopping cart tech, it is now made easier than ever for anyone to start a shop online. You can now run successful eCommerce businesses without having to look for the storage of inventory or even having a website! More and more business-minded people, because of this, are giving online selling a go.
However, amidst the excitement and thrill of watching sales and money pour in, it is very important that you remember that an eCommerce business, even on Amazon, has legal obligations just like any other business. This includes Value Added Tax and your obligation to undergo VAT registration in UAE.
In this article, we will run you through rules related to VAT for Amazon companies.
What is the VAT registration threshold for Amazon companies in UAE?
When maintaining a physical store, as soon as your business reaches the point in which its turnover is Dhs 375,000 or more per year, you are mandated by the Federal Tax Authority to undergo VAT registration in UAE and include a five percent tax rate to the prices of goods. For eCommerce VAT, ALL goods that are sold online are to be charged with the standard VAT rate in UAE.
Take note: you have to make sure that your tax registration number is listed in your Amazon account or eCommerce website where it’s clear to clients and customers. You don’t have to show a breakdown of VAT for each product that you sell online. It is possible to just show the price with the VAT charge included.
Read more: VAT Return Filing Issues In UAE
What are the VAT charges for different types of supply made over the internet?
In the UAE, the medium in which a transaction occurs doesn't alter the sale of goods' taxability. All physical goods that are supplied online attract VAT if the supplier is an entity that is VAT registered and supply are made within the UAE. A guiding principle that you can use with VAT charging for an eCommerce transaction is that it's the same with traditional commerce. As a VAT registered business, when you sell goods online and the goods are were already delivered locally, that's a standard rate supply with a five percent VAT charge.
A supply of goods that’s made online can be considered as zero-rated if the goods are taken to any non-implementing state outside of UAE. Necessary export paperwork has to be maintained for such a transaction. Whether VAT is at five or zero percent on the supply of goods will depend on the delivery’s destination.
For instance, for VAT registered businesses that are selling books on Amazon or any site online, they have to charge five percent VAT on top of the books’ price when they are delivered to local destinations. If the books are exported to countries that don’t implement VAT, the supply of books will be zero-rated so long as the businesses are able to maintain the necessary paperwork that provides sufficient evidence of export.
For goods that are supplied online which are exported through courier or postal company, a VAT registered business has to maintain an invoice to a customer from overseas and a courier consignment note or a parcel posting receipt.
You may be interested in reading: VAT on Residential Real Estate in the UAE
Should an Amazon business provide a tax invoice?
VAT invoices are required to be supplied for all transactions and maintained by VAT registered businesses. Tax invoices are to include the following details:
- Date of issuance of the tax invoice
- Words, 'tax invoice,' displayed on the document
- Business name, tax registration number (TRN) and address of the VAT registered business making the supply
- Name, TRN, and address of the buyer, if applicable
- Date of supply (only if it is a different date from the issuance of the tax invoice)
- Description of the services or goods that are supplied
- For every service or product, the quantity, volume, and unit price, the tax rate that is applicable, and the amount that is payable (should be in AED)
- Any discount that is offered and the exact amount
- Gross amount that is payable by the consumer (should be in AED)
Find out: VAT Registration Cost
VAT registration for eCommerce in UAE
Registering for VAT in UAE may sound like a complete hassle; however, if you are running an online business online e.g. through Amazon’s fulfillment program, then it is a must for you to undergo UAE VAT registration. With Farahat & Co, you can rest assured that you won’t have to go through the headache and stress from complying with your tax obligations. Our team of regulated tax agents in Dubai is here to help. Whether you are already running an established online business or you are still getting your online business off the ground, we will be very happy to provide you with the expert help you need in getting your business in order.
Leave us a message or give us a call to get more useful information from our team of VAT Consultants in UAE.