UAE Drops VAT for Bulk Electronics and Smartphone Buyers!

In the future, buyers will instead provide a written declaration to the seller, so UAE electronics and smartphone traders will no longer charge VAT on bulk sales.

UAE electronics and smartphone traders will no longer charge VAT

Traders and wholesalers in the UAE dealing with electronics, mobile phones, computers, and accessories will receive much-needed relief from their VAT obligations. This relief specifically applies to business-to-business (B2B) transactions among VAT-registered dealers, with no changes affecting VAT on consumer purchases of electronic goods.

Under the new regulations, sellers of these products will no longer be required to impose VAT on their supplies to VAT-registered buyers who plan to resell the goods. Instead, going forward, buyers will provide a written declaration to the seller and independently account for VAT on their purchases. This process is known as the ‘Reverse Charge Mechanism’ and is already in place for bulk gold trade between VAT-registered dealers in the UAE.

Extending this decision to encompass electronics and computer products is a significant development for the electronics and computer trade sector in the UAE. It solidifies the UAE’s position as a prominent re-export hub for this market, providing a notable boost to the industry.

Previously, many overseas bulk buyers would purchase electronic goods from various individual suppliers in the UAE, and these goods were later combined for export.

There were instances where customers couldn’t provide export documents to each supplier, potentially making VAT a cost for the local seller.

With the new system in place, electronics goods bought in bulk in the UAE can now be sold to a single VAT-registered consolidator or shipping company using the Reverse Charge Mechanism. The shipping company can then export the goods to the overseas customer in a single shipment, complete with the necessary documents. This change is expected to significantly reduce operating costs for mainland suppliers.

What 'reverse charge' means for small businesses

In simplified terms, these changes will make it easier for electronics businesses in the UAE to comply with tax regulations, according to a prominent industry source.

The tax authority is shifting from collecting VAT at multiple points to a single collection point. This simplifies the tax collection process, rectifies any system gaps, and reduces the potential for lost revenue.

Furthermore, Electronics businesses will now have access to funds tied up in VAT, which they can use to expand their operations. The Reverse Charge Mechanism shifts the responsibility for VAT payments to a different party.

These new regulations reaffirm the authorities’ commitment to transforming Dubai and the UAE into a center for technological innovation and trade. We are excited to witness the industry’s growth under this updated tax framework.

The timing of this change couldn’t be better for the local electronics and tech sector. As we enter the final quarter of 2023, it’s the time when bulk deals become commonplace, with overseas buyers placing orders with UAE suppliers for everything from the Apple iPhone 15 to trending gaming devices.

The new requirements simplify the entire process, particularly in terms of accounting for VAT on such deals. They also reaffirm the UAE’s reputation as the go-to place for purchasing gadgets.

To maintain competitiveness as a trading hub, it’s crucial that the UAE remains affordable and offers easy trading opportunities.

This announcement regarding the Reverse Charge Mechanism is a clear indication that the feedback and insights from the business community and industry groups were heard. As a Board Member of the Dubai Computer Group, which represents the interests of IT traders in Dubai, we’ve been actively providing feedback through official channels to streamline processes and ensure that the UAE retains its competitive edge as a re-exporter.

The information provided herein is for the general information of the user and is provided in good faith. We make no representation or provide warranty of any kind, express or implied, regarding the adequacy, suitability, validity, or completeness of the information. Our advice in regard to UAE corporate tax and value added tax is based on our understanding of the relevant laws and the regulations issued. We cannot be held responsible for new regulations and/or interpretation of existing regulations by the FTA that is not consistent with our advice. Under no circumstance shall we have any liability to any user of this information or to third parties for any loss or damage of any kind incurred as a result of the use or reliance of this information.