Everything E-gaming Operators Must Know about VAT in the UAE
The online gaming industry is one of the sunrise sectors that surprisingly gained prominence in the UAE after the COVID-induced lockdowns. More players are entering the sector right now to tap into the opportunities promised by the e-gaming sector. Like all other businesses, e-gaming companies and service providers must comply with the VAT legislation in the UAE.
Online gaming players are required to follow FTA’s VAT guidance (VAT GEC1) for electronic services in the UAE as transactions through the internet comes under online service. VAT consultants in Dubai can equip the taxable business with adequate knowledge about the tax issues. In the meantime, read on for all the major aspects of VAT compliance that e-gaming investors must know.
Understanding E-Gaming Structure
There are three main stakeholders in the e-gaming system:
- Developer who invents the games
- Game Publishers who operate the platform
- Players who are the end-users
The VAT obligations of the e-gaming industry are dependent upon where these three constituents are situated. In most cases, the servers of the online game are located in one part of the world but and end-users could be spread across the world. For example, the server could be in the United States and the players would be somewhere in the UAE. In a second scenario, the publisher could be based in the UAE and the users could be outside the UAE. This makes the VAT treatment of gaming companies a bit more intricate as the companies should be aware of the tax laws of other countries where the game is being played.
VAT Registration for Online Gaming
Most of the e-gaming companies are unaware of their obligations for registering for VAT in the UAE. Article (18) of VAT Decree-Law states that a non-resident who makes taxable supplies in the UAE is required to register for VAT unless there is any other UAE resident person who is responsible for accounting for VAT on their behalf. This means if a player in the UAE is buying/ downloading a product (game), the non-resident is required to make VAT registration and comply with the legislation. Gaming businesses should seek the assistance of FTA-approved tax agents in Dubai, UAE to register for VAT.
Accounting for VAT & Reverse Charge Mechanism
In typical situations, the responsibility for accounting for VAT in the UAE lies with the taxable supplier of goods. However, in certain situations, the Reverse Charge Mechanism applies and the recipient must account for VAT in the UAE instead of the supplier. The reverse charge mechanism applies in the following cases,
- The supplier doesn’t have a place of residence in the UAE
- Supplier is not registered for VAT but a recipient is a taxable person who is a resident in the UAE
The reverse charge mechanism doesn’t apply in cases where the player is an individual who is not taxable. In such a situation, the online gaming operator should register and account for VAT in the UAE. If the player is a VAT-registered person, reverse charge mechanism applies and the responsibility of accounting for shifts to the player.
VAT Implications for Gaming Subscriptions
Gaming operators or broadcasters should determine the geographical location of the subscribers to comply with local tax legislation. An online game broadcaster would not be subject to tax if it is located in the UAE but provides services to subscribers outside the UAE. It is a B2C transaction, which means the operator need to get registration in the subscriber’s country as a place of supply of subscription services would be the location of subscribers.
VAT on Online Gaming Arenas
A gaming arena is defined as a dedicated gaming centre where professional e-gamers gather to engage in gaming tournaments or related activities. Gaming arenas that are physically located in the UAE are subject to VAT as electronic services delivered to the customers are in the UAE. The FTA will consider the place of supply as UAE for transactions such as subscription fee/tournaments fee etc.
VAT Implications on Streaming Platforms
The gaming operators should consider how the FTA treats VAT on streaming platforms. These platforms are the avenues where gaming professionals stream content and live games. Some popular examples are Twitch, YouTube Gaming, and Mixer.
The geographical location of the customers is the determiner for VAT implications for streaming platforms located in the UAE. Subscription services of a streaming platform are subject to the standard VAT rate of 5% if the customers are located in the UAE. If the customers are outside of the UAE, the place of supply will be outside the UAE, and therefore, outside the scope of UAE VAT.
Consult with VAT Consultants in Dubai, UAE
Even though it’s a major sunrise sector, the online gaming industry is beset with challenges and lack of clarity when it comes to VAT in the UAE. The uncertainty exists partly due to the nature of the e-gaming ecosystem, especially the geographical locations of the various stakeholders. Determining the place of supply is the first challenge for online gaming operators to comply with tax, which can be navigated by consulting with best VAT consultants in Dubai such as Jitendra Chartered Accountants (JCA). JCA’s tax agents in Dubai takes a pragmatic approach towards resolving VAT issues of the businesses. JCA’s VAT consultancy services in Dubai include tax registration, tax assessment, VAT reconsideration etc. For better VAT compliance, hire JCA’s robust VAT consultancy services in Dubai, UAE.