Earlier this summer, Anna Burchner (CMS Tax partner), Alexandra Tuck (CMS Tax senior associate) and Laura Whiteley (Associate) held a number of roundtable discussions with clients at our Dubai office on the introduction of VAT in the Gulf. This is the third and final instalment of our VAT series of articles. This edition focuses on the TMT sector.
Hot topics for the Technology, Media and Telecomms Sector
Are the following contracts considered sale of goods or sale of services, under the VAT regime: Sponsorship; IP Licensing; E-platform; Cloud; Software?
Sponsorship, IP licensing, e-platform and cloud services are considered a taxable supply of services for VAT purposes. The supply of software would be a supply of a service if the supply is made electronically. However, if it is a one-off purchase of a software product, it may be treated as the supply of a good.
If a service provider/consultant is providing a one-off service in the UAE, will VAT be applicable? For example, for Expo 2020, there are number of consultants and firms established outside the GCC that will provide a one-off service in Dubai/UAE for just the Expo 2020. How will VAT work in these circumstances?
Under the UAE VAT regime, a supply of services is subject to VAT where the service is received. Services provided in the UAE will be subject to VAT in the UAE. Whether the supplier is required to register for VAT in the UAE is dependent on the identity of the recipient of the supply.
How does VAT apply in the telecommunication sector?
VAT is charged where the telecommunication service is used and enjoyed.
How does VAT apply when acquiring goods on blockchain and subsequently importing the goods to the UAE?
Where goods are acquired on blockchain that is not located in the UAE, the point of acquisition will not be the UAE. On the subsequent importation of the goods into the UAE, UAE VAT will be due when the goods enter the UAE port.
How does VAT apply to intangible assets including cryptocurrency?
Cryptocurrency is a cash equivalent. VAT is applied in the place of supply of the cryptocurrency/the intangible asset.
How does VAT apply to a 5-year deal on IT assets?
The supply of assets under a five-year contract is treated as a supply of services rather than a supply of goods. Ongoing supplies of services are subject to special VAT rules. For ongoing supplies of services, a VATable supply is treated as being made every time that a payment under the contract is made or a VAT invoice is raised. A supplier, therefore, has an obligation to account for the VAT due on each payment or invoice that is raised, rather than on the VAT which is due on the total consideration payable under the contract at the time that the contract is entered into.