The Federal Tax Authority (FTA) has issued Cabinet Decision No. 91 of 2023, effective from 29 October 2023, which introduces a special Reverse Charge Mechanism (RCM) to the local supply of electronic devices.
As per the new legislation, in case of supply of electronic devices1 to a registered recipient in the UAE where he intends to either resell or use them to produce or manufacture electronic devices, the following rules shall apply:
- The supplier shall not be liable for calculating VAT on the supply of electronic devices and including it in his VAT return.
- The recipient of electronic devices shall calculate due VAT and also be responsible for all applicable VAT obligations related to the supply.
The said rule shall not apply if the supply is subject to a zero rate of VAT as per Article 45(1) of Decree Law.
The following requirements should be met in order to apply RCM
- Before the date of supply, the recipient should provide the
supplier with a written declaration stipulating that:
- the intention for the supply of electronic devices is for the above-mentioned purpose; and
- he is registered for VAT with the FTA.
- The supplier should receive and store the declaration received from the recipient and verify that he is registered for VAT.
- Policy changes - Like a change in the manner of filing VAT returns;
- Revisiting the tax position already undertaken; and
- Maintenance of requisite documentation and records.
Furthermore, a clarification from the Minister of Finance is awaited regarding the criteria that should be followed to determine the pieces and parts related to electronic devices.
1. Electronic devices have been defined as mobile phones, smart phones, computer devices, tablets and pieces and parts thereof
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.