The news is out!
In the latest official bulletin published by the Federal Tax Authority (FTA), it has been announced that artists and social media influencers (SMIs) will now be subject to VAT.
How will this work, since strictly speaking, these individuals are not companies? Well, it has been confirmed by the FTA that all services provided by these artists and influencers will now be subject to VAT on the same basis as companies registered in the Emirates.
The bulletin points out that 5% VAT will apply to all services provided by artists and influencers who operate inside and outside the country. This includes all promotional activities performed online on behalf of other businesses in exchange for a consideration (whatever the nature) and giving brands access to their community. These activities include the promotion of products or services on their social networks and blogs as a product placement on Instagram, all paid physical appearances and all activities related to online marketing and advertising, restaurant invitations, gifts made by brands and any other services that these SMIs could provide for a consideration (financial and non-financial).
This announcement was shared in the latest FTA Basic Tax bulletin on the Tax Treatment of Services Provided by Artists and Influencers.
The bulletin clarifies that both financial compensation for services rendered AND expenses are subject to VAT.
Additionally, any form of non-monetary compensation received by the artist/ influencer, such as handbags, phones, perfumes, clothes, etc. in exchange for their services, is also subject to VAT.
What does this imply for companies that pay or give gifts to these artists and influencers?
Under these conditions, the company that offers gifts in exchange for the services of these influencers will also have to declare VAT on these goods. This is only valid for companies that are registered for VAT and have a TRN number.
All of these artists and influencers are required to register for VAT if the total value of the services they provide and the rewards they receive (example: gifts and other benefits) exceeds AED 375,000 over the last 12 month.
Also, artists and influencers have the option of voluntarily registering for VAT if the total value of the services they provide and the rewards they receive is greater than AED 187,500 but less than AED 375,000.
In both cases, 5% VAT will be applied and must be paid by the artist or the influence.
VAT at 0% will be applied, if the influencers and artists contractually provide services to a company outside the Emirates.
- The term artist refers to all individuals considered to be performers, singers, performing artists, makeup artists, DJs, authors … and any person carrying out an activity relating to art.
- Influencers are individuals who provide services by using their notoriety on their social media platforms such as blogs, YouTube, Instagram, etc.
- For artists or influencers who are not residents of the Emirates, if they contractually provide services to a business subject to VAT in the UAE, then the artist or influencer will not need to register for VAT. It is the company receiving the service that will have to report to the competent authorities.
- Otherwise, if the non-resident artist or influencer provides a service to an Emirati business that is not VAT registered, then the artist or influencer has to register for VAT.
The FTA office specifies in its bulletin that if an artist or influencer resident in the Emirates promotes an Emirati business abroad, 5% VAT will also be applied.
It is given as an example that “if a UAE based company owns a hotel outside the UAE, and contracts with an artist or influencer residing in the UAE to promote that hotel on its social media, the service provided by influencing it will be subject to 5% VAT ”.
Find the full bulletin on the official FTA website: READ HERE
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