The UAE Cabinet has recently implemented a new Decision, No. 91 of 2023, which has been published in the official gazette. This decision brings about a significant change in the local supply of electronic devices by introducing a special reverse charge mechanism. Under this mechanism, if a supplier sells electronic devices to a registered recipient in the UAE, and the recipient intends to either resell these devices or use them for the production or manufacturing of electronic devices, the recipient will be responsible for the reverse charge. However, there are certain conditions that need to be met for this mechanism to be applicable. (Source: PwC)
This new decision is expected to have a considerable impact on the electronic devices market in the UAE. It aims to streamline the taxation process and ensure that the appropriate taxes are paid by the relevant parties involved in the supply chain. By implementing the reverse charge mechanism, the burden of paying taxes will be shifted from the supplier to the recipient, thereby reducing the administrative burden on the government and promoting compliance with tax regulations.
The introduction of this reverse charge mechanism is part of the UAE government’s efforts to enhance its tax system and strengthen its revenue collection. It aligns with the country’s commitment to adopting international best practices in taxation and ensuring a fair and transparent business environment. The decision also reflects the government’s focus on supporting the growth of the electronic devices industry and encouraging local manufacturing.
Under the new mechanism, the recipient of the electronic devices will be required to account for the VAT due on the supply. This means that the recipient will calculate the VAT amount and include it in their VAT return, rather than the supplier charging and collecting VAT from the recipient. However, it is important to note that this reverse charge mechanism will only apply if certain conditions are met.
One of the conditions for the reverse charge mechanism to be applicable is that the recipient of the electronic devices must be a registered VAT person in the UAE. This ensures that only registered businesses can benefit from this mechanism and helps prevent any potential misuse or abuse of the system. Additionally, the recipient must have the intention to either resell the devices or use them for the production or manufacturing of electronic devices.
The introduction of the reverse charge mechanism for electronic devices is a significant development in the UAE’s tax landscape. It brings the country in line with international practices and demonstrates its commitment to implementing efficient and effective tax measures. The decision is expected to have a positive impact on the electronic devices market, as it will help reduce the tax burden on suppliers and promote local manufacturing and resale activities.
Overall, this new decision by the UAE Cabinet marks a crucial step towards strengthening the country’s tax system and ensuring compliance with tax regulations. It reflects the government’s proactive approach to creating a business-friendly environment and supporting the growth of key industries. The implementation of the reverse charge mechanism for electronic devices is expected to bring about positive changes in the market and contribute to the UAE’s economic development.
