Reverse Charge on Electronic Devices for VAT in UAE
Understanding Which Transactions the Reverse Charge Covers
The UAE uses the reverse charge mechanism for VAT on electronic devices traded between registrants. Mubarak Al Ketbi (MAK) Auditing helps companies know when and how this rule applies in the UAE. This law changes how VAT works for many businesses selling or buying electronic devices.
The reverse charge mechanism applies when a VAT-registered supplier sells electronic devices to a VAT-registered recipient. The recipient must plan to resell the devices or use them for manufacturing or producing new devices. The word “resell” means selling at retail or wholesale, as a main business. If a buyer uses the devices in their own business but not for making or selling electronics, the rule doesn’t apply.
The law also covers cases when the recipient buys parts to make or build another electronic device. This counts as “production” or “manufacturing” for VAT.
Electronic Devices Covered by the Rule
Not all devices are included in the reverse charge rule. The law lists what is covered:
- Mobile phones and smartphones (with basic or advanced features)
- Computer devices (desktops, laptops, servers, control units)
- Tablets (touchscreen portable computers)
- Parts for these devices
But the law excludes:
- E-readers with only simple reading functions
- Devices that work only through physical wires or fiber optics (except computers)
The law applies to computer devices, even if they connect by wires or wireless. Tablets are always included if they’re portable, have touchscreens, and offer more than reading functions.
What Is the Reverse Charge Mechanism?
Normally, the supplier charges VAT on all sales. With the reverse charge mechanism for electronic devices, the supplier doesn’t add VAT. Instead, the buyer (recipient) is responsible for reporting and paying VAT on their tax return.
- The supplier doesn’t collect VAT from the recipient.
- The recipient declares and pays VAT on the purchase.
This system moves the tax responsibility from the seller to the buyer. It’s important for both the supplier and recipient to follow the steps so they avoid mistakes or penalties.
Conditions for Using the Reverse Charge
To use the reverse charge mechanism, both supplier and recipient must meet these requirements:
- Both parties are registered for VAT in the UAE.
- The recipient must confirm in writing that the purchase is for reselling or manufacturing devices.
- The supplier must keep the recipient’s declaration on file.
- The supplier must check the recipient’s VAT registration (for example, using the FTA website).
If the buyer doesn’t give a declaration, the supplier must charge VAT like a normal sale. If the sale is for export, special zero-rate rules might apply.
Compliance Steps for Suppliers and Recipients
What Recipients Must Do:
- Give the supplier a written declaration before the sale date.
- Confirm the devices are for resale or production.
- Prove they’re registered for VAT (provide their Tax Registration Number).
What Suppliers Must Do:
- Get and keep the recipient’s declarations before making the sale.
- Confirm the buyer is registered for VAT using the official FTA method.
- If the buyer doesn’t give the declaration, charge VAT as usual.
- Issue a tax invoice with all required details.
If a supplier misses any step, they could be fined. If a recipient doesn’t give the declaration, they may not recover input tax.
Key Points for Businesses Applying Reverse Charge
- Always keep proof of buyer’s VAT registration and intent.
- Issue and keep proper invoices and declarations.
- Check if the goods are included in the law’s list.
- If unsure, ask Mubarak Al Ketbi (MAK) Auditing for advice.
- Don’t assume every device sale qualifies for reverse charge—check every deal!
How Mubarak Al Ketbi (MAK) Auditing Can Support You
Understanding VAT rules can feel like you’re walking a tightrope! Mubarak Al Ketbi (MAK) Auditing always gives businesses a safety net for VAT compliance.
We help clients by:
- Explaining if your sales qualify for reverse charge.
- Checking your invoices and declarations for every transaction.
- Making sure you register and file VAT correctly.
- Helping you stay updated on VAT laws in the UAE.
- Protecting you from mistakes and costly penalties.
For more information:
- Visit our office: Saraya Avenue Building – Office M-06, Block/A, Al Garhoud – Dubai – United Arab Emirates
- Or contact/WhatsApp: +971 50 276 2132
