Cabinet Resolution issued by the UAE Ministry whereby a reverse charge mechanism (RCM) on supply of electronic devices to VAT-registered persons was introduced.

Key updates

• The Federal Decree-Law No. 8 of 2017 (UAE VAT law) was amended to include Article 48(8) vide Cabinet Resolution No. 91 of 2023.
• The Cabinet resolution introduced a reverse charge mechanism on supplies of electronic devices to VAT registered persons.
• “Electronic device” is defined to include mobile phones, smart phones, computers, tablets, and their parts and components.
• A separate decision will be issued by the UAE Ministry of Finance to specify the criteria for determining “parts and components of the electronic devices”.
• The amendment will be effective 60 days from the date of publication (30 August 2023) in the Official Gazette.

Conditions for applying RCM

• The recipient must be registered under VAT and has to provide the supplier with written statements specifying that the electronic devices are purchased for the purposes of resale or to be used to produce or manufacture other electronic devices.
• The supplier must retain the statements provided by the recipient and also verify if the recipient is registered under VAT.
• RCM does not apply where the supply of electronic devices is subject to 0% VAT as export of goods.

Relevance

• Historically, RCM has been used in the UAE for supplies of crude or refined oil, unprocessed or processed natural gas, or pure hydrocarbons, and for gold and gold products.
• However, in the present case, a possible objective for the expansion of RCM to include electronic devices is likely to address liquidity issues of distributors and manufacturers of electronic devices.
• It is interesting to see if further developments may come to expand the scope of RCM to include additional goods and/or services.