Cabinet Decision No. 91 of 2023 on Electronic Devices among Registrants in the State for the purposes of Value Added Tax

Overview

Recently, the UAE’s Federal Tax Authority (FTA) introduced Cabinet Decision No. 91 of 2023, published in the Official Gazette on 25th August 2023, which will be enforced 60 days from its publication date.

Defining Electronic Devices

Firstly, it’s crucial to define what this decision pertains to Electronic Devices, as outlined in the decision, encompassing a range of products including mobile phones, smart phones, computer devices, tablets, and their components.

Reverse Charge Mechanism on Electronic Devices

This decision introduces the application of the Reverse Charge Mechanism to Electronic Devices. What does this mean for you as a taxpayer?

1. When Does the Reverse Charge Mechanism Apply?

The Reverse Charge Mechanism in UAE comes into place when a supplier provides Electronic Devices to a registered Recipient of Goods with the intention of either resale or use in the production/manufacturing of more Electronic Devices. Here’s what you need to know:

The supplier (seller) is relieved of the responsibility for accounting for Tax related to the supply of Electronic Devices. They do not have to report this Tax in their tax return.

On the flip side, the Recipient of Electronic Devices (buyer) is tasked with accounting for the Tax on the value of the devices they received. This includes taking responsibility for all tax obligations resulting from this supply and accounting for the Due Tax.

2. What are the Exceptions to the Rule?

There are exceptions to this mechanism. If the supply of Electronic Devices is subject to Tax at the zero rate, as per Article 45 of Federal Decree-Law No. 8 of 2017, then the Reverse Charge Mechanism may not be applicable.

3. What are the Compliance Procedures?

For the Reverse Charge Mechanism to be implemented, certain procedures must be followed:

The Recipient of Electronic Devices must, prior to the supply, provide the supplier with a written declaration indicating the intent to use or resell the devices for the specific purposes outlined in the decision. Additionally, they must confirm their registration status with the Authority.

The supplier of Electronic Devices must, also prior to the supply, receive and retain the declarations provided by the buyer. They must also verify that the buyer is registered according to the approved means set by the Authority.

4. Are there any Consequences of Non-compliance?

Yes, if the Recipient of Electronic Devices fails to submit the necessary declarations, as mentioned in the decision, the provisions of the Reverse Charge Mechanism will not apply. Consequently, the Electronic Devices in question cannot be considered as being used or intended for the specific purposes outlined in the regulations.

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