UAE's Federal Tax Authority published a decision regarding VAT Reverse Charge Obligation for Electronic Devices

The United Arab Emirates (UAE) Federal Tax Authority (FTA) has published Cabinet Decision No. 91 of 2023 on 25 August 2023 (corresponding to 8 Safar 1445 H). This Cabinet Decision introduces a domestic Value Added Tax (VAT) reverse charge obligation concerning the supply of defined electronic devices within the UAE. The decision is effective from 30 October 2023.

The UAE's tax authority clarified what constitutes electronic devices and their associated parts. This includes phones, computers, tablets, and related components.

For businesses involved:

• If an entity sells or manufactures these devices, they'll need to account for VAT.

• A new Ministerial Decision identifies parts subject to domestic reverse charge rules.

• Essential parts for device operation fall under reverse charge; optional accessories don't.

Regarding supply:

• Suppliers won't charge VAT when selling electronic devices to VAT-registered recipients.

• Recipients must self-account for VAT under reverse charge, responsible for all related VAT duties.

• Exports and movement within UAE zones differ in VAT application.

Conditions for applying reverse charge:

• Recipients need to declare the purpose (resale or manufacturing) and confirm their VAT   registration.

• Suppliers must retain these declarations and verify recipient VAT status via approved methods.

Non-compliance:

• Failure to provide necessary declarations means the recipient can't recover incurred input VAT, becoming a VAT cost for them, per Article 54(1)(a) and (b).

In terms of the Public Clarification VATP034, where the recipient fails to provide the necessary declarations to the supplier where the electronic devices will be used for resale or manufacturing purposes, it will not be eligible to recover the input VAT incurred in accordance with Article 54(1)(a) and (b). The VAT incurred will become a VAT cost to the recipient.