Navigating the criteria’s to determine part or pieces of Electronic Devices as per Ministerial Decision No 262 of 2023

Navigating the criteria’s to determine part or pieces of Electronic Devices as per Ministerial Decision No 262 of 2023

The Public Clarification issued by the Federal Tax Authority outlines the factors to follow in determining tax for parts and pieces of electronic devices. The clarification is associated with Ministerial Decision no 262 of 2023 on the criteria that the state must follow to determine tax implications for the parts and pieces used for electronic devices. 

Furthermore, it clarifies Cabinet Decision no 91 of 2023 on the application of reverse charge mechanism on electronic devices among all the registrants in the state for value-added Tax and lastly, it outlines Federal Decree Law no 8 of 2017 on Value added tax, including executive regulations and its amendments.

In this blog, we will navigate you through the essential factors to be followed to determine qualified pieces and parts of electronic devices under Ministerial Decision no 262 of 2023.

Background of the Ministerial Decision no 262

Cabinet Decision no 91 of 2023 which is officially termed as Application of Reverse Charge Mechanism on Electronic Devices among registrants in the states UAE on Valued Added Tax. This decision states the specified tax regulations for specific transactions that involve utilizing electronic devices. In addition, this decision implies different tax rules for a few suppliers who deal with electronic devices.

For detailed clarification of implementing Cabinet Decision no 91, FTA introduced Ministerial Decision no 262 of 2023 under Article 3. This Ministerial Decision is officially termed as Criteria to be followed to determine pieces or parts of Electronic Devices. The decision offers detailed guidelines for categorizing the components and parts of electronic devices to understand tax rules and implications.

For better understanding, refer to VARP034 along with the public clarification issued by FTA to get a clear idea of how the reverse charge mechanism is applied to electronic devices among businesses that are registered in the state of VAT.

Overview of Criteria discussed under Ministerial Decision no 262

Cabinet Decision No 91 and Ministerial Decision No 262 have defined rules regarding electronic devices and their components. As per Cabinet Decision no 91, electronic devices can include mobile phones, smartphones, tablets, computer devices, and their pieces and parts.

On the other hand, Ministerial Decision no 262 has highlighted three criteria to determine if a certain piece or part is connected to electronic devices.

Manufacture or Production

These components must be regularly utilized to create electronic devices and these devices must be regulated normally.

Operational purpose

The piece or part of the electronic device is not used in the manufacturing production, but it is necessary for normal operations of electronic devices. This involve parts like chargers, battery packs, power chords, and similar components.

Replacement purpose

These pieces or parts must serve as replacements for those components that meet with first or second criteria.

In addition, it is essential to note that these criteria are different. A piece or part may not fit one criterion, still it could still meet another specified category. In short, these regulations help in determining whether certain components are related to electronic devices by considering factors like:

  • How it is used for creation
  • Functioning components
  • Replacement of vital parts

FTA has defined the three main criteria of electronic device components in detail. Want to learn more about these criteria? Keep reading…

First Criterion

The first criterion of Ministerial Decision no 262 applies to parts or pieces important for the regular functioning of electronic devices like mobile phones, computers, smartphones, and tables. The pieces and parts covered under this criterion are diodes, regulators, resistors, capacitors, coils, microchips, heart rate monitors, processors, transistors, couplers, accelerometers, gyroscopes, and more.

For instance, these pieces or parts are involved in smartwatches connected to smartphones, or mobile phones and watches that have independent cellular network features.

For computer devices, the decision has included hardware components like CPU, RAM, optical drive, hard drive, network interface card, and internal parts like keyboard, and portable computer device. External input devices for instance computer mice mouse, external output devices like monitors and printers, and secondary storage devices like external hard disks are excluded as they are not utilized in the manufacturing or production procedure of electronic devices.

However, to meet this criterion the pieces and parts must have normal operation of electronic devices. Parts like crystals or gold leaves applied during the manufacturing procedure of a certain smartphone or other decorative parts added to a smartwatch do not fulfill the criterion as it is not considered vital for the normal operation of electronic devices.

Second Criterion

There are a few pieces and parts which may not be used for the manufacturing or production process of electronic devices, however, they are important for the regular functioning of devices.

Even if electronic devices operate normally for a certain period without these components, the continuous operation depends on utilizing specified components that meet with this criterion. For instance, chargers (wired or wireless). Even if a few electronic devices function for a while without chargers, still they need to fulfil regular optimal operation.

In addition, external motors, mouse and keyboards for desktop computers are highlighted components in the second criterion. Even if these external components are not part of the internal manufacturing procedure, they remain a vital component for the optimum functioning of desktop computers.

Third Criterion

The pieces and parts highlighted in the third criterion are replacement components that meet the first or second criterion. For example, capacitors, couplers, diodes, regulators, resistors, microchips, and more components are found in smartphones, tablets, mobile phones, and tablets which satisfy the first criterion of this decision.

These components are also termed replacement parts when they are separately offered by one registered supplier to another registered supplier. This can occur when the second supplier has an intention to resell the replacement parts or pieces.

In short, if a business sells individual parts like coils, and microchips to another business for resell then these components would qualify as replacement parts under the third criterion of Ministerial Decision no 262 of 2023.

Exclusions of Ministerial Decision no 262

Some certain pieces and parts improve the functions or enjoyment of electronic devices but aren’t important for the primary operation or activation of the device. As per Article 3(2)(a) of Ministerial Decision no 262, external components are not related to electronic devices.

For instance, non-important pieces involve external speakers, keyboard devices, phone cases, cover combos for tablets, earphones, screen protectors, selfie sticks, power adaptors, projectors, USB sticks, dongles, and more.

However, suppliers need to assess whether their supply is a complete package or different things. This factor is based on Article 4 of Executive Regulation to apply for Cabinet Decision no 9.

Note that, SIM cards and similar external smart cards like R-UIM cards, eSIMs, and subscriber cards which may be essential for a few electronic devices are excluded from the application of Ministerial Decision No 262 and Cabinet Decision No 91. When you supply SIM and related cards, as a supplier you need to consider the application of Article 4 of the Executive Regulation and assess if the supply has is a single composite supply for the successful application of Cabinet Decision no 91.

Additional factors to consider of Article 4 of Executive


When an individual sells a package comprised of multiple items for one fixed price, then they need to determine whether it is qualified as a single constituent or if each item needs to be treated separately. Sounds confusing? These factors can be determined based on a few criteria highlighted in Article 4 as essential regulations.

Single Composite Supply

A single composite supply can be referred to as selling goods or services, offering more than one part. Assessment of single composite supply includes overseeing the contract and specific factors of the sale.

Conditions to remember for Single Composite Supply

Single Composite Supply is considered under a few conditions:

  • If there is supply of Principal component together with supply of another component which is not essential or significant part of it, but it is necessary for making the supply.
  • If the two or more elements form a single supply and it would be impossible or unnatural to split.

Other conditions of Single Composite Supply as per Clause 2

Single composite supply can be defined as if

  • The seller does not list the price of items separately or charge for each part individually.
  • All the parts or pieces are delivered from one supplier

Multiple Suppliers

If the seller offers more than one component for a single or fixed price and is not termed as a single composite supply, then each part or piece will be considered a separate sale.

In short, If the items collectively sold are connected then they must be supplied as a single constituent, or else the supplier can choose to treat it as an individual item. The determination of criteria of parts or pieces of electronic devices for tax implication can be identified by observing the method of price or if it is delivered from one seller or not.

Final Thoughts

The clarification outlined by FTA along with the regulations of Ministerial Decision 262 of 2023 aims to make recent laws clear to the state. Based on the criteria highlighted in this article, businesses need to evaluate whether the goods they deal with fall under these criteria to maintain smooth transactions and other tax procedures.

If you are still confused as to whether your business falls under the criteria and regulations highlighted above, then get in touch with us. Tax Consultants of N R Doshi and Partners will help your business to maintain finances correctly, keeping the criteria and laws in mind.

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