As the UAE witnesses a rise in the number of career opportunities in the performing arts industry and for social media influencers, UAE authorities recognize the impact these roles have on society and have set guidelines and introduced compliances for the industry, especially tax implications.
Value Added Tax (VAT) was introduced in the UAE beginning of 2018 at a rate of 5 percent.
Who are social media influencers?
The Federal Tax Authority defines artists as performers, singers, dancers, stage artists, make-up artists, DJs, poets, songwriters, or individuals doing similar activities and Social Media Influencers as individuals who provide their services using social media to promote products and services such as bloggers, Instagrammers and YouTube hosts.
As per the new law, all UAE-based Artists and SMIs who make taxable supplies (which include zero-rated supplies) in the UAE are required to register for VAT provided the value of their taxable supplies and imports in the last 12 months exceeds or is expected to exceed AED 375,000 (mandatory registration threshold) or AED 187,500 (voluntary registration threshold) in the next 30 days.
VAT will be chargeable on all supplies (Services) made by Artists and SMIs subject to the UAE VAT Laws and would attract VAT at the appropriate rates. Services such as online promotional activities, marketing, and advertising-related activities would be considered as supplies made by SMIs and VAT would be applicable.
For calculating the threshold, the Artists and SMIs 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.
Once the Artists and SMIs are registered for VAT, a Tax invoice is required to be raised for all standard rate supplies made. This includes online promotional activities, videos, blog or social media posts, paid physical appearances, or any publicity activities.
Artists and SMIs making taxable supplies are eligible for a full recovery of input VAT, except for blocked items such as Certain entertainment services and motor vehicles that are available for personal use.
Non-resident social media influencers
We recommend that Non-resident Artists and social media influencers who act in their personal capacity should check whether the services are provided to VAT-registered recipients or not in the UAE. If the recipient is VAT registered, then the recipient is obliged to account for VAT under the reverse charge mechanism, however, if the service is to an unregistered recipient, they will be required to register for VAT in the UAE immediately and charge VAT on the supply.
If an Artist or SMI receives goods in return for their services, the goods are treated as consideration for the services. At the same time, where the person supplying the goods to the Artist or SMI in exchange for the services is registered for VAT, such person will also need to account for VAT on the supply of goods.
Acting through agents
In addition, where a VAT registered Artist or SMI does not charge any consideration for its services, it should consider the provisions related to deemed supplies and account for VAT if the supply falls within the meaning of a deemed supply. Or if an Artist or SMI owns an event management company, then the company should only account for VAT on the supplies made by the company. The individual is considered distinct from the company and is responsible to account for VAT only on the supplies made in his personal capacity.
In summary, if an Artist or SMI has an agent and the agent acts in the name of and on behalf of the Artist or SMI, The Artist or SMI must account for VAT on the entire amount charged to the client and the agent must account for VAT on the fee or commission charged to the Artist or SMI. If an Artist or SMI has an agent the agent acts in its own name and contracts with the client on one hand and with the Artist or SMI on the other hand, The Artist or SMI must account for VAT on the amount charged to the agent and the agent must account for VAT on the amount charged to the client.
In conclusion, if a UAE-resident Artist or SMI is contracted by a UAE-based company to provide advertising services, the service would attract VAT at 5% even where the advertising service is performed outside the UAE.
News Source: Jay Krishnan, an audit professional at HLB HAMT.