Below, we declutter the UAE VAT Regulations for social media agencies and other creative agencies to ensure complete compliance with UAE’s laws.
We will also highlight some real examples, which will help you understand how this applies to your agency (or influencer profile).
Before we can get to the regulations, if you’re a social media agency or any kind of marketing/production firm, here’s a quick brush up on some basics:
What is VAT? : VAT is an indirect form of tax. This is a tax that is not a burden on the business, but on the end consumer. You will charge & collect VAT from the client and pay this (after reducing the VAT on your expenses) to the FTA. If your client is registered for VAT then he will be able to claim back this VAT from the FTA. So being registered to VAT, will not impact the income you earn, nor will it increase the expense of your client.
Definitely read this:
If you are an artist, an influencer, a marketing agency, a public relations firm, a media production agency, a photographer or any kind of creator, you need to fully comply with the tax regulations in UAE like any other business.
There is no special update on UAE VAT Regulations for Social Media Agencies and Influencers (as was rumored on LinkedIn and numerous WhatsApp groups) in the law.
If your sales over the last 12 months, or next 30 days will cross the
- Mandatory threshold (AED 375,000) you must register
- Voluntary threshold (AED 187,500) you have the option to register.
If you decide to register you will then have to start charging VAT to your customers, when applicable, and also file for your VAT returns quarterly. Don’t worry, it’s not as complicated as it seems. We are here to simplify this for you.
One of the main advantages of being registered is that you now have the opportunity to claim back the VAT on all your business expenses except-
- Certain entertainment expenses
- Purchase, rent or lease of vehicle that is also available for personal use.
FAQs for UAE social media and marketing agencies practices:
I sell art/services to clients outside UAE, do I charge them 5% VAT?
No, if the client is outside UAE, and enjoys the service outside UAE, the sale would be zero rated. This means that the sale is taxable with 0% VAT. If you are registered, you would need to disclose this in your VAT return.
Do I need to raise a Tax Invoice?
Yes, If you are located in the UAE & provide any services to the client in UAE which is chargeable at 5%, you must raise a Tax invoice that meets all the requirements as per the FTA.
I decided to give my artwork or services for free. This has a value of AED 50,000, is there any VAT impact for this?
Yes! This will be treated as a deemed supply. You will need to pay 5% of the value of the free product or service. In this case, the VAT payable will be AED 2,500.
I am an influencer on makeup products, in exchange for a social media post I charge AED 5,000 + 5% VAT. I also get reimbursed AED 1,050 for all the makeup products purchased to make the post. How do I disclose this in my VAT return?
It is clear that you will have to disclose AED 250 (5% of 5,000) as output VAT (or VAT payable) in your return. You will also have to disclose an additional AED 50 (VAT portion of 1,050) as output VAT. So your taxable sales will be AED 6,000 & your output VAT will be AED 300.
How does the VAT treatment work if I have an agent or a media agency between me and my client?
This depends on what the role of the agent is.
If the agent has a direct contract with the client – Then the agent will raise an invoice with VAT to the client for the service provided as per the contract, and you will raise an invoice with VAT for your services to the agent.
If you have a direct contract with the client and agent charges you for commission – You will have to raise an invoice with VAT to your client directly. The agent will raise an invoice with VATto you for the commission. The VAT charged on this commission can be claimed back by you in your VAT return.
What happens if I don’t register for VAT, even after crossing the mandatory threshold?
You will be penalized AED 20,000 by the FTA for late registration. You will be given an effective date of registration based on when you crossed the threshold. Because of this you will be required to file returns in the past. You will then have an additional penalty for late return filing of AED 1,000 for the first return and AED 2,000 for each return after that. There will also be a charge for late payment fee, which will be a percentage of the payable amount, this can go upto 300%.