The Federal Tax Authority (FTA) in the United Arab Emirates (UAE) has just announced that services provided by UAE-based artists and social media influencers (SMIs) are now subject to VAT. In certain cases – non UAE-based artists and SMIs will also be charged VAT on their services.
What is VAT?
VAT or Value-Added Tax – known as a good and services tax in some countries – is a consumption tax on a product that is paid by the recipient at each stage of production, distribution, or sale to the end consumer.
For example, let’s say a wholesaler sells a pair of shoes to a retailer for $100. The wholesaler would collect a VAT of 5% – with the retailer (the end consumer) paying $105 and the wholesaler receiving a refund of the VAT amount it paid prior to the manufacturer.
How does the FTA Define ‘Artists’ and ‘Social Media Influencers’?
Artists include but are not limited to “performers, singers, dancers, stage artists, makeup artists, DJs, poets, song writers or any other individuals carrying out their own activities” .
SMIs – on the other hand – are broadly defined as individuals who use social media to “promote products and services” – which includes bloggers and YouTube hosts.
Is VAT chargeable to all services provided by UAE-based Artists and Social Media Influencers?
According to the FTA, all services provided by Artists are subject to normal VAT rates.
VAT chargeable services provided by SMIs – on the other hand – are defined as the following:
“Any online promotional activities performed on behalf of other businesses for a consideration, such as promoting a product in a blog, featuring a product in a video or otherwise promoting a business on a social media post; Any physical appearances, marketing and advertising related activities; Providing access to any SMIs’ network on social media etc; and any other services that the SMIs may provide for a consideration”.
In short, a SMIs net profit for conducting online promotional or marketing services will now be subject to VAT rates.
Help! I am an Artist or SMI based in the UAE. Do I need to register for VAT?
According to the FTA, all “UAE-based Artists and SMIs who make taxable supplies (which include zero-rated supplies) in the UAE are required to register for VAT provided the value of their taxable supplies and imports in the last 12 months exceeded, or is expected to exceed in the next 30 days, the mandatory registration threshold of AED 375,000”.
This means UAE-based Artists and SMIs who made over AED 375,000 from 1. their services and/or 2. from goods received while providing services to a client or business will be required to register for VAT.
For example, if a SMI receives a watch as a gift from a client or business – the market value of the watch is subject to VAT considerations. UAE-based Artists and SMI’s who made over AED 187,500 can also voluntarily register for VAT.
The FTA recommends that Artists and SMIs consider the value of all their services even if they don’t fall into their “core artistic or influencer activity”.
Okay – so I’ve registered for VAT. What are my VAT obligations as an Artist or SMI?
According to the FTA, Artists and SMIs must comply with all obligations in “accordance with the VAT and Tax Procedures legislations, including but not limited to submission of periodic VAT returns, issuance of tax invoices, etc”.
I am a British Influencer who is providing promotional or marketing services for a UAE-based business or individual: am I subject to VAT?
This answer depends on if the UAE-based recipient of the services is registered for VAT.
If the UAE-based recipient of your services is registered for VAT, then non-UAE Artists and SMIs will not be required to register and pay for VAT.
However, if the UAE-based recipient of your services is not registered for VAT, then non-UAE Artists and SMIs will be required to immediately register for VAT in the UAE and charge VAT on their services.
Hello – British Influencer here again: do I have to pay VAT if I’m promoting or marketing a hotel in Europe but the hotel is owned by a UAE-based company?
The unfortunate answer is Yes. Since you are offering services to a UAE-based company, your services will be subject to a 5% VAT even if you are providing those services outside the UAE.
For example, if you are taking photos for a hotel in Switzerland but the hotel is owned by a UAE-based hotel chain, you will be subject to a 5% VAT.
Do I have to pay VAT if a UAE-based business or individual offers me a good instead of money in exchange for my services?
Again – goods received by Artists or SMIs [such as a watch or phone] in exchange for their services will be subject to VAT.
According to the FTA, goods in which the “entire or part of the consideration is non-monetary, the value of the supply is the monetary part plus the market value of the non-monetary part, less the VAT amount”.
Correspondingly, businesses and individuals who supply the goods to Artists or SMIs in exchange for services and are registered for VAT will need to apply VAT to the supply of that good.
Due to the complex nature of such “barter arrangements” – VAT charges on the supply of goods will be assessed on a case-by-case basis.
Help! I am an Artist or SMI in the UAE who owns my own company (i.e. an entertainment company) but I also provide solo services independent of that company. Do I have to charge VAT for these independent services or can I lump these services under my company?
The answer is no.
According to the FTA, your company should “only account for VAT on the supplies made by the company”.
Even if you hold “100% shares” in your company, independent services you provide outside your company will need to account for VAT separately.