2023-10-25 13:52:55
Wednesday, October 25, 2023 – 5:52 pm
Abu Dhabi, October 25 / WAM / The Federal Tax Authority and those registered for value-added tax with the authority, as of October 30, will begin working on the new decision regarding the application of the reverse charge mechanism on supplies of electronic devices among those registered with the authority.
Under the mechanism, the responsibility for imposing value-added tax on supplies of electronic devices such as mobile phones, smart phones, computers, tablets, and their parts and parts is transferred from the registered supplier to the registered recipient, in the event that they are supplied to a registered recipient with the intention of reselling them or using them for production or manufacturing. electronic devices.
Accordingly, the registered recipient will have to calculate VAT on these supplies, and will be responsible for recording them in his tax return and for all tax obligations on these supplies.
The Federal Tax Authority indicated that the implementation of the mechanism comes in implementation of the Cabinet’s decision regarding the application of the reverse charge mechanism on electronic devices among those registered in the country for the purposes of value-added tax, which will come into effect on October 30, 2023.
She stressed that the new amendments come within the framework of plans for continuous development and modernization of tax legislation and procedures to keep pace with changes, raise the efficiency of the tax system and continuously improve its performance to enhance confidence and cooperation between the Authority and taxpayers, and support them to fulfill their tax obligations efficiently and smoothly, as these amendments contribute to maintaining the levels of cash liquidity in the country. Registered investors and suppliers of electronic devices and reducing the tax burden on them.
In a new clarification – within the framework of the “General Clarifications” service available on the website of the Federal Tax Authority – it specified the goods covered by the decision, noting that “mobile phones and smart phones” according to the decision include phones and mobile devices that only perform the functions of making phone calls and/or sending Text messages and smartphones that include additional functions. This is limited to phones and devices that operate wirelessly, and does not include phones that operate through physical means such as wires or fiber-optic cables.
The decision also includes all computer devices, including personal and desktop computers, small, analog, digital, and hybrid computers, server computers, computer control units for automobile engines, and other similar devices. It also includes tablet devices, represented by wireless portable personal computers equipped with With touch screens that combine the functions of smartphones and computers, while the decision does not include e-reading devices that are marketed on this basis, without having any other functions such as gaming or Internet browsing functions.
The Federal Tax Authority indicated in its clarification that if the requirements contained in the decision are not met; The basic rule that the supplier must account for VAT applies, and this may result in the registered recipient being unable to recover the input VAT incurred.
According to the clarification, what is meant by “resale” is that it is part of the business of the recipient of electronic devices, and the resale carried out by the recipient of electronic devices can be wholesale or retail.
The clarification emphasized that the “reverse charge mechanism” does not apply to the recipient of electronic devices who obtain them for the purposes of using them in his own business, and not with the intention of production or manufacturing, since in this case he does not have the “intent to resell,” noting that, for example Purchasing smartphones to distribute to employees for business purposes is not subject to the mechanism, even if there are fees imposed on employees to receive or use those smartphones, as this is not considered a resale of the devices.
He pointed out that “production or manufacturing” of electronic devices includes, according to the decision, production or manufacturing, in whole or in part, explaining that, for example, when the registered recipient obtains parts that are considered electronic devices to integrate them into another part of an electronic device, and then install them in a semi-final computer. Owned by another person, the “reverse charge mechanism” is applied as he acquires those parts with the intention of producing or manufacturing electronic devices.
The clarification issued by the Authority included a detailed explanation of the fulfillment of various compliance obligations for applying the reverse charge mechanism on electronic devices among those registered with the Authority.
The Federal Tax Authority invited those concerned to view the general clarification through the “General Clarifications” service available on its website.
Ahmed Al-Boutli/George Ibrahim
1698242620
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