Over the past few years, Dubai has seen a rapid growth in its e-commerce industry, with several merchants and customers turning to online shopping to make their purchases. This has resulted in a paradigm shift in the way Dubai’s residents engage in commerce.
Despite it being a lucrative space for a business to operate in, sellers need to ensure they are compliant with the UAE’s tax policies. A key component of this is to obtain a value Added Tax (VAT) registration. This blog aims to explain the ins and outs of this process for those who are interested in entering this fruitful market by selling on Amazon in Dubai.
VAT REGISTRATION IN DUBAI
Amazon sellers, just like all other businesses operating in the UAE, need to obtain their VAT registration to stay compliant with local regulations.
What is VAT Registration?
VAT registration paves the way for taxation on sales and imports of a business and ensures that the Government is able to regulate the tax system. This is essential for the creation of a level playing field for all businesses to operate in. Once VAT registered, a business will be equipped with the framework to charge VAT on their sales.
VAT Thresholds and Obligations
Thresholds for Mandatory VAT Registration
If you wish to set up an Amazon company in the UAE, you must take note that the VAT registration threshold is set at AED 375,000. If your yearly taxable sales and imports exceed this value, then it is mandatory to obtain a VAT registration.
Voluntary Registration and its Advantages
However, even if a businesses yearly taxable sales and imports do not exceed AED 375,000, they are at liberty to voluntarily register for VAT if their yearly taxable sales and imports do not exceed AED 187,500. Doing so will enable your Amazon company to reclaim input VAT and claim VAT refund imports into the UAE.
Compliance and Tax Reporting Requirements
Simply put, businesses must file their VAT returns every four months. Staying on the ball in terms of record keeping will make this process easier.
SELLING ON AMAZON IN DUBAI
Before there was Amazon in Dubai, there was Souq.com. The global e-commerce giant acquired Souq.com for $580 million in 2017. This acquisition was perfectly timed, as it came along with the exponential growth of Dubai’s e-commerce sector. By 2025, it is predicted that the entire industry will grow to $31.4 billion. Given these figures, it is no surprise that you too may want to start your Amazon journey in Dubai.
VAT and E-commerce
In the UAE, a VAT of 5% is imposed on the sales of items on Amazon.ae, provided that such goods are delivered within the country.
It is also important to understand that Amazon.ae serves as a collection agent, meaning that they take on the responsibility of collecting the VAT from individual sellers, before making those payments to the government.
However, sellers also have a list of obligations to stay compliant.
To operate within the legal framework, sellers must:
- Register for VAT with the Federal Tax Authority (FTA) in the UAE and obtain a Tax Registration Number.
- Ensure your Amazon.ae listings include the VAT quotient in the listed price, while also informing the customer of the same.
- Maintain records for a minimum of five years. These must include invoices, and receipts.
- Stay informed about VAT regulations and consulting tax professionals to ensure that your business is always compliant.
STEPS FOR VAT REGISTRATION IN DUBAI
Determine Your Eligibility – As mentioned above, VAT registration may be mandatory or voluntary. By working with SetHub, our experts will help you make an informed decision on your business’s VAT registration eligibility.
Complete the Application Form – SetHub will assist you in setting up your FTA account and in the completion of all paperwork.
Pay the Registration Fee – SetHub will walk you through any fees to be paid (if necessary) and handle the payment process as well.
Receive Your Tax Registration Number – After registration, you will receive your Tax Registration Number (TRN).
After registration, SetHub will remain by your side in providing assistance to ensure that your business stays in compliance with VAT regulations.
BENEFITS OF VAT REGISTRATION
VAT registration is less about taxation and more about the financial benefits it brings about. These include creating a level playing field for all businesses while encouraging investment and personal savings.
It also increases your ease of doing business as many suppliers prefer working with businesses that are VAT registered, nodding towards transparency and compliance, ultimately resulting in increased credibility.
In Conclusion,
VAT registration is an essential point of consideration for an Amazon company in Dubai. From a macroenvironmental point of view, VAT registration serves as an indicator of compliance, transparency and credibility. Understanding these regulations thoroughly is crucial for any successful Amazon company in Dubai.
