UAE: New VAT reverse charge mechanism on local supplies of electronic devices

Application of a new reverse charge mechanism on local supplies of electronic devices, for VAT purposes

Application of a new reverse charge mechanism on local supplies of electronic devices

19 September 2023

The Ministry of Finance in UAE published Cabinet Decision No. (91) of 2023 on the application of a new reverse charge mechanism on the local supplies of electronic devices, for value added tax (VAT) purposes.

The new decision was published in the official gazette on 30 August 2023 and will come into effect after 60 days from its publication date.

Summary of the new reverse charge mechanism

Article (1) – Definitions	Electronic devices have been defined as mobile phones, smart phones, computer and tablet devices, and their connected spare parts
Article (2) – Description of the new mechanism	Applicable on local supplies of electronic devices to VAT registered recipients having the intention to resell or use the goods to produce or manufacture electronic devices Stipulates that the application will result in the following (subject to meeting specified conditions): The supplier of the electronic devices will not have any UAE VAT obligations resulting from the supply The recipient of the electronic devices will have the responsibility of accounting for VAT on the value of the electronic devices and meeting all UAE VAT obligations resulting from the supply
Article (2) – conditions for the recipient of electronic devices	The application is subject to meeting the following conditions by the recipient of the electronic devices before the date of supply: The recipient must submit a written declaration to the supplier of the electronic devices confirming its intent to resell or use the electronic devices to produce or manufacture electronic devices and confirming its VAT registration with the Federal Tax Authority
Article (2) – conditions for the supplier of electronic devices	The application is subject to the supplier of the electronic devices meeting the following conditions before the date of supply: The supplier must receive and retain the written declarations referred above The supplier must verify the VAT registration status of the recipient of the electronic devices
Key considerations	The new mechanism is not applicable when the supply of the electronic devices is subject to VAT at 0%, as specified in the UAE VAT legislation (e.g., exports) The new mechanism is not applicable when the recipient of the electronic devices does not submit the written declarations referred above Furthermore, it is important to note that the new decision suggests that the recipient of the electronic devices could have restrictions on the recovery of the associated VAT if the written declarations referred to above are not submitted.

Read a September 2023 report prepared by the KPMG member firm in the UAE

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