Cabinet Decision No. 91 of 2023, which was officially announced in Gazette Issue No. 758 dated August 30, 2023, has introduced a specialized reverse charge mechanism for local electronic device transactions. This newly enacted decision outlines the specific criteria and prerequisites necessary for applying Value Added Tax (VAT) through this reverse charge method. This measure will come into effect 60 days after its publication in the official gazette – effective on October 29, 2023, in this case.
The introduced reverse charge mechanism pertains to the supply of electronic devices, which, as defined in the decision, include items such as mobile phones, smartphones, computers, tablets, and their corresponding spare parts.
VAT on Supply of Electronic Device
1. When a supplier sells electronic devices to a registered recipient within the UAE, and the recipient intends to either resell these devices or utilise them in the production or manufacturing of electronic devices, the following rules apply:
– The supplier is not responsible for calculating VAT on the electronic device supply and should not include it in their VAT return.
– The recipient of electronic devices is responsible for calculating VAT based on the value of the devices supplied to them. They are also accountable for all VAT-related obligations associated with the supply and for determining the due VAT for such transactions.
2. To implement the special reverse charge mechanism, certain requirements must be met:
– The recipient of electronic devices must provide the supplier with a written declaration before the transaction. This declaration should indicate both the recipient’s intention regarding the electronic device supply, and their VAT registration status with the Federal Tax Authority (FTA).
– The supplier of electronic devices should receive and retain the declaration from the recipient and verify the recipient’s VAT registration in accordance with the means specified by the Federal Tax Authority (FTA).
If the recipient of electronic devices fails to submit the specified declarations mentioned in this Article, the provisions outlined in this Article will not be applicable.
This will provide a major relief in terms of cash flow management for Electronic Devices industry in UAE, as the VAT on B2B transactions will not be collected at multiple points throughout the supply chain of Electronic Devices in UAE, but only from the Ultimate End Customers in UAE. The provisions of this Cabinet Resolution shall not apply if the supply of electronic devices is subject to zero-rate tax for exports made from UAE.
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