FTA issues new Basic Tax Information Bulletin
Supplies and services provided by artists and social media influencers for a consideration are subject to VAT
Abu Dhabi, UAE 7 March, 2021: The Federal Tax Authority (FTA) has confirmed that supplies provided by artists and social media influencers for consideration are subject to Value Added Tax.
The bulletin outlines that VAT applies to such supplies provided by artists and social media influencers that include, but are not limited to, any online promotional activities performed on behalf of other businesses for a consideration, such as promoting a product in a blog or a video or otherwise promoting a business on a social media post; any physical appearances, marketing and advertising related activities; providing access to any social media influencers’ networks on social media, and any other services that the SMIs may provide for a consideration.
This announcement was shared in the latest Basic Tax Information Bulletin issued by the FTA on the tax treatment of supplies provided by artists and social media influencers.
The bulletin clarified that if an artist or influencer incurs any costs in providing a supply and subsequently recovers that cost from its client, such reimbursement falls within the scope of VAT in the UAE.
According to the bulletin, UAE-based artists and social media influencers, who make taxable supplies (which include zero-rated supplies), 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. Artists and social media influencers may also voluntarily register for VAT if the value of their taxable supplies and imports or taxable expenses incurred in the last 12 months exceeded, or is anticipated to exceed in the next 30 days, the voluntary registration threshold of AED 187,500. Any such taxable person must issue tax invoices for all supplies subject to the standard rate of 5%.
The bulletin emphasized that for the purposes of calculating the threshold, artists and social media influencers should take into consideration all the taxable supplies that they make, even if such supplies do not fall within the scope of their core artistic or influencer activity.
Artists and social media influencers providing taxable supplies and services are eligible for the recovery of any input VAT, with the exception of blocked items such as certain entertainment services, and purchased, leased or rented motor vehicles that are available for personal use.
The bulletin addressed examples of a number of tax transactions related to this sector, through which it clarified that if a non-resident artist or social media influencer contractually provides services to a VAT registered recipient in the UAE, the artist or social media influencer would not be required to register for VAT in the UAE as it is the recipient of such services who is obliged to account for VAT under the reverse charge mechanism.
Where an artist or social media influencer provides services to unregistered UAE-based individuals or businesses, and the place of supply falls within the UAE, there is no registration threshold. Therefore, where an artist or SMI provides any services to such an unregistered recipient, they will be required to register for VAT in the UAE immediately and charge VAT on the supply.
According to the bulletin, if an artist or social media influencer receives goods (such as a mobile phone) in return for their services, the goods are treated as consideration for the services rendered. Where the entirety 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. At the same time, where the person supplying the goods to the artist or SMI in exchange for services is registered for VAT, such person will also need to account for VAT on the supply of goods.
The bulletin confirms that as the concept of barter arrangements (goods or even services) is complex, the VAT implications of such supplies should be assessed on a transaction-by-transaction basis.
The FTA launched the Basic Tax Information Bulletins as part of its plans to continuously improve and build on tax awareness by providing business sectors and taxpayers with regular general information regarding tax transactions related to their businesses. The bulletins aim to provide relevant tax information that concern each sector through a series of specific points, characterized by simplicity and order, that allow business sectors to refer to and easily comprehend information that may seem unclear or ambiguous with regards to the application of laws, executive regulations, and tax procedures.
Basic Tax Information Bulletins are regularly issued via the Federal Tax Authority’s website and can also be found on the media and the Authority’s social media pages to extend the scope of beneficiaries.