VAT on e-commerce in the UAE: online sellers and electronic services

UAE VAT applies at 5% to online sales of goods and services when the place of supply is in the UAE. For electronically supplied services, the test is where the service is used and enjoyed. Online platforms are treated as agents or principals depending on how they deal with customers. The FTA's E-Commerce VAT Guide sets out the rules.

Online sales of goods

Selling goods online does not change the VAT analysis. The place of supply for goods is generally where they are when the supply takes place, or where they are delivered when they are moved. A UAE business selling to a customer in the UAE charges 5% if it is registered. Goods exported out of the UAE can be zero-rated if the export conditions are met. See zero-rated exports and customs duty and import tax.

Electronically supplied services

Electronically supplied services are delivered over the internet with little or no human involvement. The FTA's guide gives examples such as software, digital content, domain names and web hosting. For these services, the place of supply is where the customer uses and enjoys the service. Services used in the UAE are within the scope of UAE VAT at 5% even when the seller is overseas. Services used outside the UAE are outside the scope.

Quick reference

Marketplaces and platforms

An online marketplace is analysed as an agent or an intermediary. The FTA's guide distinguishes between a platform that discloses the seller and one that does not. Where the platform is an undisclosed agent, two separate supplies may need to be recognised. If you sell through a platform, check who issues the invoice, who collects the money and who is treated as the supplier. These points decide who accounts for VAT.

Non-resident sellers

A non-resident that makes taxable supplies in the UAE and has no UAE customer able to account for VAT by reverse charge may have to register. There is no minimum threshold for a non-resident in that position. See non-resident VAT registration and the reverse charge mechanism.

Proving where the customer is

Keep evidence of the customer's location, such as billing address, delivery address or other reliable data. The FTA expects a consistent method that you can explain. Using a single data point, such as the IP address, may not be enough when other information points elsewhere.

Invoices and records

Online sales to businesses need a full tax invoice. Sales to consumers may use a simplified invoice if the conditions are met. Keep platform reports, payment gateway statements and delivery records. See tax invoice requirements. The FTA's guide may have been updated since publication, so check the current version at tax.gov.ae.

Worked examples

A Dubai software company sells a monthly subscription to a customer in Abu Dhabi. The service is used in the UAE, so 5% VAT applies and the invoice shows it. The same company sells the same subscription to a customer in Germany who uses it there. The use and enjoyment is outside the UAE, so the supply is outside the scope of UAE VAT, and the company should record evidence of the customer's location. A retailer in Sharjah ships goods to a customer in Oman. If the export conditions are met and the retailer keeps the shipping and customs records, the supply can be zero-rated.

Payment gateways and fees

The fees charged by payment gateways and marketplaces are separate supplies. A UAE gateway charges VAT on its fees, which you can usually recover as input tax if you make taxable supplies. A foreign gateway may not charge UAE VAT, and you may have to account for it by reverse charge. Check the invoices and treat each one by its place of supply. See the reverse charge mechanism.

Refunds, discounts and returns

E-commerce brings high return rates. When a customer returns goods and you refund the price, issue a credit note that shows the VAT reversed. Keep the original invoice reference. Without the credit note, you may have accounted for output tax on a sale that was cancelled. See VAT credit and debit notes.

Systems and controls for online sellers

• Configure the shop platform to apply the right tax code by customer location.
• Export monthly sales reports by country and by tax treatment.
• Reconcile platform payouts to sales, fees and refunds.
• Keep a copy of the terms that set who is the supplier on marketplaces.
• Review the setup after every new channel or product line.

When to register

Count taxable supplies from all channels together when you test the registration threshold. Sales on marketplaces, your own site and social channels all count. See the VAT registration threshold.

Dropshipping and cross-border models

In dropshipping, you take the order and the supplier ships directly to your customer. VAT depends on who is the supplier of the goods, where the goods are when they are supplied, and who imports them. Where goods ship from abroad into the UAE, import VAT and customs apply to the importer of record. Where you are the importer, you may be able to recover import VAT if you are registered. Map each flow before you launch, and keep the commercial invoices, shipping bills and customs declarations. See customs duty and import tax.

Subscriptions and digital products

For subscriptions, the tax point and the place of supply matter. Issue invoices that show the customer's country and the VAT treatment, and keep proof of location. For customers in the UAE with a UAE tax number, the supply is a business-to-business sale. For consumers, a simplified invoice may be used. When you change pricing, check whether the displayed price includes VAT.

E-commerce VAT checklist

• Registration status confirmed against the threshold.
• Tax codes set up in the shop platform.
• Evidence of customer location kept.
• Credit notes issued for refunds.
• Platform and gateway fees checked for VAT and reverse charge.
• Monthly reconciliation from platform reports to the ledger.

Frequently asked questions