The Federal Tax Authority (‘FTA’) has published a bulletin highlighting VAT implications for Social Media Influencers (‘SMIs’) and Artists (performers, singers, dancers, stage artists, make-up artists, DJs, poets, songwriters etc.).
The Key Points
- The Artists and SMIs based in the UAE will follow the general rule of tax at the appropriate rate of either 5% or 0% (subject to meeting the zero-rate conditions).
- The recharge of costs received by SMIs or Artists in delivering the services will also fall within the scope of VAT.
- All UAE based Artists and SMIs will register for VAT, if the value of taxable supplies has exceeded AED 375,000 in the last 12 months, or if is predicted to exceed the AED 375,000 in the next 30 days.
- Non-resident Artists and SMIs must register for VAT if they make any taxable supplies in the UAE and if no other registered individual is obliged to report in their place.
- Any taxable activity made to a non-tax registered recipient in the UAE will create a VAT liability for a non-resident Artist or SMI.
- According to the law the SMIs or Artist should take into account all taxable supplies they make.
- Where an Artist or SMI enters into barter arrangements (exchange of goods for services) the goods will be treated as payment option for the service and VAT must be accounted. Where a supply is made for a non-monetary consideration, the value is measured as the sum of the monetary part and the market value of the non-monetary part, less the VAT number.
- When Artists and SMIs offer services for free, the transaction must be reviewed and handled in compliance with the considered supply provisions.
- As a general rule, Artists and SMIs will be able to completely recover the input VAT they have paid, subject to the usual limits imposed by UAE VAT law, such as entertainment facilities and the purchase, lease, or hire of motor vehicles for personal use.
- The bulletin has presented a variety of industry situations, including:
- If the Artists/SMIs own an event production business, the products made by the individuals will be handled separately from the company’s supplies. As a result, VAT duties would have to be fulfilled separately.
- When intermediaries act as agents on behalf of and in the name of Artists or SMIs, they would be required to account for production VAT on their commission. Artists and SMIs would then be required to account for VAT on the total amount they charge their client.
- VAT must be accounted for on the full amount paid by the SMI or Artist to the intermediary, and the intermediary must account for VAT on the full amount charged to the client when intermediaries work in their own name and contract for both the client and the Artists or SMIs separately.
- The supplies would be subject to the normal rate of 5% if a UAE resident Artist or SMI is engaged by a UAE based client to provide promotional services outside the UAE. For example, if a UAE-based client owns a resort abroad and hires a UAE SMI to promote the resort by vlogging their experiences or sharing stories on social media sites, the supplies provided by the UAE resident SMI will be subject to 5% VAT.
FundForth experts will be glad to assist all UAE based SMIs and Artists in compliance with VAT registration.
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