What is VAT?
On January 1, 2018, the United Arab Emirates implemented Value Added Tax (VAT). For the majority of goods and services, the normal VAT rate is 5%; however, certain items and services are free from VAT or have a 0% rate (if certain requirements are met).
The Gulf Cooperation Council (GCC) member states that do not impose VAT, international transportation, the supply of natural gas and crude oil, the initial supply of residential real estate, and certain specialized industries like healthcare and education are among the sectors that are eligible for the 0% VAT in Dubai rate on goods and services exported. Certain financial services and the consequent supply of residential real estate are excluded from VAT. Additionally, there is no VAT applied to transactions involving bare land and local passenger transportation.
What are the criteria for VAT registration?
In the following two scenarios, firms must register for VAT:
If a business located in the United Arab Emirates’s taxable supply and imports above AED 375,000 annually. Regardless of the value, if a non-UAE-based company produces taxable supplies in the UAE no one else is required to pay the applicable tax on these supplies in the UAE. For companies whose annual supply and import totals surpass AED 187,500, VAT is optional. A corporate entity reimburses the government for the taxes it receives from its clients. Simultaneously, the government reimburses it for the taxes it pays to its suppliers. International companies can also claim back the VAT they pay.
What services are considered electrical services in VAT?
The services listed below have been categorized as “Electronic services” following the UAE’s applicable VAT Law provisions:
- The provision of software and services for software updates
- Domain name supply
- Provision of equipment, web hosting services, and remote maintenance
- Electronically supplied text, graphics, and information, including photos, screensavers, electronic books, and other digital files and papers;
- On-demand video, music, and gaming supplies;
- availability of digital publications;
- granting permission to place an advertisement on a website owned by an organization, along with all necessary rights;
- Provision of broadcasts related to art, culture, politics, science, education, entertainment, or sports;
- The availability of remote education;
- live advertising content streaming via the internet;
- Services with comparable goals, purposes, and functions to those listed above.
How does VAT apply to digital marketing services in the UAE?
One of the sectors in the world that is expanding the fastest is digital marketing. Digital marketing services are provided on a variety of platforms, including social media marketing, SEO, email marketing, search engine marketing, and more, in a wide range of UAE emirates. In the UAE, VAT was effective on January 1, 2018. In the United Arab Emirates, digital marketing services like the ones listed above are liable to 5% VAT.
Conclusion: Every marketing firm that has registered for VAT should pay close attention to adhering to the regulations set forth by the VAT law for online services provided in the United Arab Emirates.