GTL Summary:

This Public Clarification, VATP034, details the application of Cabinet Decision No. 91 of 2023, introducing a mandatory VAT reverse charge mechanism for supplies of specific Electronic Devices between VAT-registered businesses in the UAE. The mechanism applies when the recipient intends to resell the devices or use them in manufacturing. It clarifies that the recipient, not the supplier, is responsible for accounting for the Due Tax. For this treatment to apply, the recipient must provide written declarations to the supplier confirming their VAT registration and intent. Failure to comply results in the supplier charging standard VAT.

Document Type: PC - Public Clarification
Guidance Code: VATP034
Year:
Related Law: uae-indirecttax-law-vat-uaevat-8-of-2017-as-amended
Authority: Federal Tax Authority
Last updated at: 2025-12-26 14:13:53 UTC

VATP034

VAT Public Clarification

Application of the Reverse Charge Mechanism on Electronic Devices among Registrants in the State for the purposes of Value Added Tax

Issue

Cabinet Decision No. 91 of 2023 on the Application of Reverse Charge Mechanism on Electronic Devices among Registrants[1] in the State for the purposes of Value Added Tax ("Cabinet Decision No. 91") has introduced a distinct VAT treatment for certain supplies that relate to Electronic Devices and requires both recipient and supplier to implement a number of compliance requirements.

This Public Clarification intends to clarify the purpose of the updates in the legislation, the goods in scope and the practical implications of the compliance requirements introduced.

Summary

Registrants supplying Electronic Devices to other registrants who intend to use these Electronic Devices for resale or manufacturing, will not account for VAT on such supplies, and Due Tax on the supplies will be accounted for under a reverse charge by the Recipient of Goods (“Recipient”). If the requirements specified in Cabinet Decision No. 91 are not met, the default rule of the supplier accounting for VAT would apply but this could result in the recipient not being able to recover input tax under Article 54(1) of the Federal Decree- Law No 8 of 2017 on Value Added Tax (“Decree- Law').[2]

Cabinet Decision No. 91 was issued under the mandate provided by Article 48(8) of the Decree- Law.[3]

Detailed Analysis

Scope of Transactions - For resale or to use in production or manufacturing

Transactions will only fall within the scope of Cabinet Decision No. 91 if the intention of the Recipient of the Electronic Devices was to resell these Electronic Devices or use them in producing or manufacturing Electronic Devices.

“Resell” is to be understood as being a part of the Business of the Recipient of the Electronic Devices to trade in such devices. The resale by the Recipient of the Electronic Devices can be at a wholesale or retail level.

A Recipient who is acquiring the Electronic Devices for use in his business, other than for production or manufacturing, has no “intention to resell”. This is, for example, the case for the purchase of smartphones who then will be distributed, for professional use, amongst employees, even if the employees are being charged for the receipt or use of the smartphones.

The phrase “producing or manufacturing” Electronic Devices covers both partial and full production or manufacturing of Electronic Devices. For example, if the Recipient acquires pieces, considered to be Electronic Devices, to assemble into another part of an electronic device and insert into a semi-finished computer device that is owned by another person, the Recipient acquires the pieces with the intention to produce or manufacture Electronic Devices.

Scope of Goods – Electronic Devices

This clarification only applies to Electronic Devices as these goods are specifically defined under Article 1 of the Cabinet Decision No. 91.[4]

Electronic Devices are defined as mobile phones, smart phones, computer devices, tablets and pieces and parts thereof.

“Mobile phones and smart phones” must be understood in a broad sense and the scope for these ranges from mobile phones that only have call and/or text functions to smart phones that include many additional functions.

The scope of Cabinet Decision No. 91 is restricted to phones that operate through wireless transmission. Phones operating through physical means such as wire or fiber optic cables, do not fall within the scope of this decision.

The Decision also applies to computer devices whereby no distinction applies if such computer devices operate through wireless transmission or require physical means. The definition covers computer devices in a broad understanding and includes personal computers, desktop computers, minicomputers, analog, digital and hybrid computers, server computers, computerised engine control units (“ECU”) for cars, and other similar devices.

Tablets are included under the definition of Electronic Devices.[4] “Tablets” are in essence wireless, portable personal computers with a touchscreen interface, being a hybrid in form and with functionalities between a smart phone and a computer device.

E-readers, marketed as such, without any other features such as gaming functionalities or web browsing, and that may include different hardware and software compared to tablets, are not included under the definition of Electronic Devices.

For the parts and pieces of Electronic Devices, the Minister of Finance shall issue a decision that will specify the criteria that should be followed in determining the pieces or parts related to Electronic Devices.

It is the responsibility of Registrants to assess the application of the provisions of Article 4 of the Cabinet Decision No. 52 of 2017 on the Executive Regulation of the Federal Decree-Law No. 8 of 2017 on Value Added Tax and its amendments (“Executive Regulation”),[5] for example whether a supply that includes a component of making charges constitutes a single composite supply or if they are multiple supplies. If the making charges constitute a separate supply, this supply does not fall within the scope of Cabinet Decision No. 91.

Reverse Charge Mechanism

Taxable persons are generally required to impose VAT on all taxable supplies made in the UAE.[6]

As an exception to the above, for the supplies of Electronic Devices within the scope of Cabinet Decision No. 91 and subject to compliance requirements to be met, a reverse charge mechanism shall apply.

The VAT treatment and reporting by supplier and Recipient shall be as follows:

  1. The supplier shall not account for VAT on the supplies to the Recipient and he shall not report any Due Tax in his VAT return.

  2. The recipient of the Electronic Devices shall be the one to account for the Due Tax on the transaction and shall be responsible for all tax obligations resulting from such supply

The above will be applicable if the following requirements are met:

  1. Where a supplier, registered for VAT in the UAE, provides Electronic Devices to a Recipient, registered for VAT in the UAE and if the Recipient had the intention to resell the Electronic Devices or use them to produce or manufacture Electronic Devices.

  2. Both supplier and Recipient must be Registrants for VAT in the UAE.

  3. The supplier retains a written declaration from the Recipient confirming (a) and (b).

It must be noted that the supplier must comply with all other obligations incumbent on him, including but not limited to the issuance of a Tax invoice that contains the particulars under Article 59(1)(l)[7] of the Executive Regulation.

The Recipient shall declare the Due Tax in box 3 of its VAT return.

Taxable supplies falling outside the scope of Cabinet Decision No. 91 – Direct and Indirect Exports

The provisions of Cabinet Decision No. 91 do not apply in case the supplier, registered for VAT, makes a direct or indirect export of Electronic Devices. If the conditions for zero-rating are met, exports will not trigger any output tax to account for but will be reported as zero-rated supplies.

Compliance requirements to be met for the application of the reverse charge

Article 2(3) of Cabinet Decision No. 91 imposes documentary and compliance requirements on both the supplier and the Recipient for the reverse charge mechanism, as clarified above, to apply.[9]

Requirements incumbent on the Recipient

Before the date of supply, as determined under Article 25[10] or Article 26[11] of the Decree-Law, the Recipient of the Electronic Devices must provide two declarations to the supplier, as follows:

  • a written declaration indicating that the intent of the supply of Electronic Devices is for the purposes of reselling or to use the Electronic Devices in producing or manufacturing Electronic Devices;

  • a written declaration confirming that he is registered with the FTA.

The declaration confirming that Recipient is registered with the FTA should contain the details of the Tax Registration. This will allow the supplier to meet the requirements incumbent on him. The two declarations can be combined into a single document that is then provided to the supplier.

Requirements incumbent on the supplier

Before the date of supply, as determined under Article 25 or Article 26 of the Decree-Law, the supplier of the Electronic Devices must comply with two requirements as follows:

  • He must have received, and then keep, the declarations provided by the Recipient as clarified above.

  • He must verify and confirm that the Recipient is a registrant.

The verification and resulting confirmation, by the supplier that the Recipient is a registrant, should be done in accordance with the means approved by the FTA in that respect.

For verification of the recipient’s TRN, the supplier should use the functionality provided on the FTA’s website, i.e. under the “TRN verification” tab on the right side of the homepage.

Not meeting the compliance requirements – the supplier accounts for VAT

If the Recipient did not, prior to the date of the supply, provide the supplier with the declaration of intent and the declaration confirming that he is a Registrant, then the supplier must account for Output Tax on the supply of the Electronic Devices, unless the supply meets the conditions for zero rating under Article 45(1)[12]of the Decree-Law, read with Article 30[13] of the Executive Regulation.

Not meeting the compliance requirements – the Recipient cannot recover the input tax

If the Recipient of the Electronic Devices does not, before the date of supply, provide the supplier with the declaration of intent and the declaration confirming that he is a Registrant, not only must the supplier account for Output Tax on the supply, but the Recipient also cannot consider that the Electronic Devices are used or intended to be used:

  • to make taxable supplies or

  • to make supplies that are made outside the UAE, but would have been taxable supplies had they been made in the UAE.

Under application of Article 54(1)(a) and (b) of the Decree-Law, if the Electronic Devices are not used or intended to be used by the Recipient for the supplies that allow recovery of Input Tax, he cannot recover such input tax.

As a result, if the Recipient, did not declare his intent of use of Electronic Devices, as required by Cabinet Decision No. 91, the Input Tax incurred by him on the supply of the Electronic Devices is not recoverable.

Under application of Article 51 of the Tax Procedures Law, the burden of proof with regards to the entitlement of recovery of Input Tax, falls on the Taxable Person.[14] If the Recipient does not provide a declaration of intent, as clarified above, to the supplier, the Recipient is not meeting the set requirements to prove that he is using or intending to use the Electronic Devices for the purposes of the cases under Article 54(1)(a) and (b) and, hence, he will not be entitled to recover the input VAT incurred.

Designated Zones[15]

Article 30(3) of the Executive Regulation states that a movement of goods into a Designated Zone from a place in the UAE or a supply of goods to a Designated Zone shall not be considered an export of those goods and can, therefore, not be eligible for the zero-rate as applicable to the exports of goods.[16]

A supply of Electronic Devices from the UAE mainland to a Designated Zone, or a movement of such goods from the UAE mainland to a Designated Zone, shall not, therefore, fall under the exception as provided under Article 2(2) of Cabinet Decision No. 91 and all other relevant provisions of this decision will apply.[17]

Hence, the supply shall also be subject to the provisions of Cabinet Decision No. 91.

Date Cabinet Decision No. 91 coming into effect

To allow Registrants to prepare for the additional compliance requirements, Cabinet Decision No. 91 becomes effective after 60 days from the date of its publication in the Official Gazette.

Since the Decision was published in the Official Gazette on 30 August 2023, the date it comes into effect is 30 October 2023.

All supplies of Electronic Devices with a date of supply of 30 October 2023 or later, shall be subject to the VAT treatment and compliance requirements as clarified in this Public Clarification. It may result in suppliers and registered recipients having to apply two different VAT treatments and meeting different compliance obligations within the same VAT reporting period.

This Public Clarification issued by the FTA is meant to clarify certain aspects related to Federal Decree-Law No. 8 of 2017 on Value Added Tax and its Executive Regulations and their amendments, and Cabinet Decision No. 91 of 2023 on the Application of Reverse Charge Mechanism on Electronic Devices among Registrants in the State for the purposes of Value Added Tax.

This Public Clarification states the position of the FTA and neither amends nor seeks to amend any provision of the aforementioned legislation. Therefore, it is effective as of the date of implementation of the relevant legislation, unless stated otherwise.

Legislative References:

In this clarification, Federal Decree-Law No. 8 of 2017 on Value Added Tax and its amendments is referred to as “Decree-Law”, Cabinet Decision No. 52 of 2017 on the Executive Regulation of the Federal Decree-Law No. 8 of 2017 on Value Added Tax and its amendments is referred to as “Executive Regulation”, Federal Decree-Law No. 28 of 2022 is referred to as “Tax Procedures Law”, and Cabinet Decision No. 91 of 2023 on the Application of Reverse Charge Mechanism on Electronic Devices among Registrants in the State for the purposes of Value Added Tax is referred to as “Cabinet Decision No. 91”.

[1]Article 1 of the Decree-Law defines the term "registrant" as the taxable person who has been issued with a TRN.

[2]Article 54(1) of the Decree-Law states that the input tax that is recoverable by a taxable person for any tax period is the total of input tax paid for goods and services which are used or intended to be used for making any of the following:

  1. Taxable supplies.

  2. Supplies that are made outside the UAE which would have been taxable supplies had they been made in the UAE.

  3. Supplies specified in the Executive Regulation of the Decree-Law that are made outside the UAE, which would have been treated as exempt had they been made inside the UAE.

[3]Article 48(8) of the Decree-Law states that the Cabinet may issue a decision specifying other goods or services that are subject to the reverse charge and specify the relevant conditions and provisions.

[4]Article 1 of Cabinet Decision No. 91 defines the term "Electronic Devices" as mobile phones, smart phones, computer devices, tablets and pieces and parts thereof.

[5]Article 4 of the Executive Regulation states that:

  1. Where a person made a supply consisting of more than one component for one price, the person shall determine whether the supply constitutes a single composite supply or multiple supplies.

  2. The phrase “single composite supply” means a supply of goods or services, where there is more than one component to the supply, and taking into account the contract and the wider circumstance of the supply.

  3. A single composite supply shall exist in the following cases:

    1. Where there is supply of all of the following:

      1. A principal component

      2. A component or components which either are necessary or essential to the making of the supply, including incidental elements which normally accompany the supply but are not a significant part of it; or do not constitute an aim in itself, but are instead a means of better enjoying the principal supply.

    2. Where there is a supply which has two or more elements so closely linked as to form a single supply which it would be impossible or unnatural to split.

  4. A single composite supply may exist under Clause 2 of this Article if all of the following conditions are met:

    1. The price of the different components of the supply is not separately identified or charged by the supplier.

    2. All components of the supply are supplied by a single supplier;

  5. Where a taxable person supplies more than one component for one price and the supply is not a single composite supply, then the supply of the components shall be treated as multiple supplies.

[6]Article 4(1) of the Decree-Law states that the tax imposed shall be the responsibility of a taxable person who makes any supply stipulated in Clause 1 of Article 2 of the VAT Decree-Law.

[7]Article 59(1)(l) of the Executive Regulation states that, where the invoice relates to a supply under which the recipient of goods or recipient of services is required to account for tax, a statement that the recipient is required to account for tax, and a reference to the relevant provision of the VAT Decree-Law, shall be included in the tax invoice.

[8]Article 59(5)(b) of the Executive Regulation states that, as an exception to Clause 4 of this Article, the taxable person may issue a tax invoice that meets the requirements of Clause 2 of this Article, where the recipient of goods or recipient of services is a registrant and the consideration for the supply does not exceed AED 10,000. [G1]

[9]Article 2(3) of Cabinet Decision No. 91 states that, for the purposes of the application of Clause 1 of this Article, the following shall be considered:

  1. Prior to the date of supply, the recipient of Electronic Devices shall:

    1. Provide the supplier of Electronic Devices with a written declaration indicating that the intent of the supply of Electronic Devices is for the purpose of the cases provided for in Clause 1 of this Article.

    2. Provide the supplier of Electronic Devices with a written declaration confirming that he is registered with the FTA.

  2. Prior to the date of supply, the supplier of Electronic Devices shall:

    1. Receive and keep the declarations stated in paragraph (a) of Clause 3 of this Article.

    2. Verify that the recipient of Electronic Devices is registered in accordance with the means approved by the FTA in that respect.

[10]Article 25 of the Decree-Law states that tax shall be calculated on the date of supply of goods or services, which shall be the earliest of any of the following dates:

  1. The date on which goods were transferred, if such transfer was under the supervision of the supplier

  2. The date of placing the goods at the disposal of the recipient of goods, if the transfer was not supervised by the supplier.

  3. Where goods are supplied with assembly and installation, the date on which the assembly or installation of the goods was completed.

  4. The date on which the goods are Imported under the Customs legislation.

  5. The date on which the recipient of goods accepted the supply, or a date no later than 12 months after the date on which the goods were transferred or placed at the disposal of the recipient of goods, if the supply was made on a returnable basis.

  6. The date on which the provision of services was completed.

  7. The date of receipt of payment or the date on which the tax invoice was issued.

[11]Article 26 of the Decree-Law states that:

  1. The date of supply of goods or services for any contract that includes periodic payments or consecutive invoices shall be the earliest of any of the following dates:

    1. The date of issuance of any tax invoice.

    2. The date payment is due as specified on the tax invoice

    3. The date of receipt of payment.

    4. The date of expiration of one year from the date the goods or services were provided.

  2. The date of supply, in cases where payment is made through vending machines, shall be the date on which funds are collected from the machine.

  3. The date of deemed supply of goods or services shall be the date of their supply, disposal, change of usage or the date of deregistration, as the case may be.

  4. The date of a supply of a voucher shall be the date of issuance or supply thereafter.

[12]Article 45(1) of the Decree-Law states that the zero rate shall apply to a direct or indirect export of goods and services to outside the Implementing States as specified in the Executive Regulation of the Decree-Law.

[13]Article 30(1) and (2) of the Executive Regulation states that:

  1. The direct export shall be subject to the zero rate if the following conditions are met:

    1. The goods are physically exported to a place outside the implementing states or are put into a customs suspension regime in accordance with GCC Common Customs Law within 90 days of the date of the supply.

    2. Official and commercial evidence of export or customs suspension is retained by the exporter.

  2. An Indirect export shall be subject to the zero rate if the following conditions are met:

    1. The goods are physically exported to a place outside the implementing states or are put into a customs suspension regime in accordance with GCC Common Customs Law, within 90 days of the date of the supply under an arrangement agreed by the supplier and the overseas customer at or before the date of supply.

    2. The overseas customer obtains official and commercial evidence of export or customs suspension in accordance with GCC Common Customs Law, and provides the supplier with a copy of this.

    3. The goods are not used or altered in the time between supply and export or customs suspension, except to the extent necessary to prepare the goods for export or customs suspension.

    4. The goods do not leave the UAE in the possession of a passenger or crew member of an aircraft or ship.

[14]Article 51 of the Tax Procedures Law states that the burden of proving the accuracy of the tax return falls upon the taxable person, and the burden of proof in cases of tax evasion falls upon the FTA.

[15]Article 50 of the Decree-Law states that a “Designated Zone” that meets the conditions specified in the Executive Regulation of the Decree-Law shall be treated as being outside the UAE.

[16]Article 30(3) of the Executive Regulation states that for the purposes of this Article, a movement of goods into a designated zone from a place in the UAE or a supply of goods to a designated zone shall not be considered an export of those goods.

[17]Article 2(2) of Cabinet Decision No. 91 states that the provisions of Clause 1 of this Article shall not apply if the supply of Electronic Devices is subject to tax at the zero rate in accordance with Clause 1 of Article 45 of Federal Decree-Law No. 8 of 2017 referred to.

GTL Notes

[G1]There is no reference to this footnote in the official document.

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