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Page last updated:: Wednesday, October 25, 2023

Federal Tax Authority Issues Public Clarification on implementing Reverse Charge Mechanism on electronic devices among registrants in the UAE

Federal Tax Authority Issues Public Clarification on implementing Reverse Charge Mechanism on electronic devices among registrants in the UAE Wednesday, October 25,2023

Federal Tax Authority Issues Public Clarification on implementing Reverse Charge Mechanism on electronic devices among registrants in the UAE

  • The Mechanism to be applied on supplies of electronic devices for resale or for manufacturing purposes from 30 October 2023.
  • The Authority strives to continuously update taxpayers on published legislation and procedures to keep up with legal developments and support them in meeting their obligations.


Abu Dhabi, UAE - 25 October 2023: The Federal Tax Authority (FTA) and registrants for Value Added Tax (VAT) with the Authority are set to begin implementing a new decision as of Monday, 30 October 2023, applying the Reverse Charge Mechanism (RCM) on supplies of electronic devices among tax registrants. The RCM will result in the liability for Value Added Tax (VAT) on supplies of electronic devices – such as mobile phones, smart phones, computer devices, tablets, and their parts and pieces – to be transferred from the registered supplier to the registered recipient provided they are supplied to a registered recipient for the purpose of being resold or used in manufacturing of electronic devices. The registered recipient will then be responsible for calculating VAT on those supplies, including it in their Tax Return, and meeting specific tax obligations related to these supplies.

The Authority noted that implementing the Mechanism is in line with Cabinet Decision regarding the Application of the Reverse Charge Mechanism (RCM) on Electronic Devices for VAT purposes, which comes into effect on 30 October 2023.

The FTA confirmed that the new amendments are part of an ongoing endeavour to update legislation and tax procedures to keep pace with developments, improve the efficiency of the tax system, strengthen trust and cooperation between the Authority and taxpayers, and support taxpayers to meet their tax obligations. These measures will also contribute to maintaining the levels of cash liquidity of registered investors and suppliers of electronic devices and reducing their tax burden.

In a new Clarification – available under the Public Clarifications service on the FTA’s official website – the FTA outlined the goods covered by the Decision, “mobile phones and smart phones”, which include phones and devices that only have call and/or text functions, as well as those that include additional functions. It applies only to phones and devices that operate through wireless transmission and excludes phones and devices operating through physical means, such as wire or fibre optic cables.

The Cabinet Decision also includes all types of computers, such as personal computers, desktop computers, minicomputers, analogue, digital, and hybrid computers, servers, computerised engine control units (ECU) for cars, and other similar devices. It also covers tablets, which are in essence wireless, portable, personal computers with a touchscreen interface, with functionalities that combine those of a smartphone and a computer. E-readers, marketed as such, without any other features such as gaming or web browsing, are not included under the definition of electronic devices.

The FTA explained in the clarification that if the requirements specified in the Cabinet Decision are not met, the regular rule for VAT would apply, where the supplier is required to calculate VAT. However, this could result in the registered recipient not being able to recover input tax incurred.

According to the clarification, for the purpose of implementing the Decision, “Resell” is to be understood as being a part of the business of the recipient of the electronic devices. The resale by the recipient of the electronic devices can be at a wholesale or retail level.

The Reverse Charge Mechanism does not apply when a supply is made to a recipient who is acquiring the electronic devices for use in hisr own business, and not for production or manufacturing or with no “intention to resell”. For example, when smartphones are acquired to be distributed amongst employees for professional use, the Decision does not apply even if the employees are being charged for the receipt or use of the smartphones as this is not considered a resale that is part of the trade activity of the taxpayer.

The phrase “producing or manufacturing” electronic devices in the Decision covers both partial and full production or manufacturing of electronic devices. For example, if the registered recipient acquires parts, considered to be electronic devices, to assemble into another part of an electronic device and insert into a semi-finished computer that is owned by another person, the RCM applies as the parts are acquired with the intention to produce or manufacture electronic devices.

The FTA's Clarification includes a detailed explanation of the compliance requirements for the Reverse Charge Mechanism on electronic devices among registrants.

The Authority invited all stakeholders to check the new Public Clarification under the Public Clarifications service on the FTA official website:


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