FTA Clarifies Implementation of Reverse Charge Mechanism for Electronic Devices in the UAE



The Federal Tax Authority (FTA) of the UAE has announced the implementation of the Reverse Charge Mechanism (RCM) on supplies of electronic devices to VAT registrants, starting 30 October 2023. This decision mandates the shift of VAT liability from the supplier to the registered recipient for transactions involving electronic devices intended for resale or use in manufacturing.

This move aligns with the Cabinet's decision to apply the RCM on electronic devices for VAT purposes, aiming to streamline tax obligations for registered suppliers and recipients. It targets a wide range of electronic devices, including mobile phones, smartphones, computer devices, tablets, and their components, provided these are supplied to a registered recipient for resale or manufacturing purposes.

The FTA emphasizes that this update is part of continuous efforts to refine tax legislation and procedures, enhancing the tax system's efficiency and fostering trust and cooperation between taxpayers and the authority. Moreover, it seeks to support taxpayers in fulfilling their obligations, maintaining cash liquidity levels for registered investors and suppliers, and alleviating the tax burden.

A new public clarification detailing the specific goods covered, including all types of computers and tablets, has been published on the FTA’s website. It clarifies the application scope of the RCM, specifying that it applies only to electronic devices intended for resale as part of the recipient's business or for manufacturing electronic devices.

The mechanism is designed to ensure that the registered recipient is responsible for calculating VAT on these supplies and includes it in their Tax Return, adhering to specific tax obligations related to these transactions. This initiative does not cover electronic devices acquired for internal business use without the intention to resell.

The FTA has outlined compliance requirements for implementing the RCM on electronic devices among registrants in a detailed explanation available under the Public Clarifications service on its official website.

For further details on the Reverse Charge Mechanism and to access the full clarification, visit the FTA’s official website.