For ages, the UAE’s economy has depended on its vast hydrocarbon reserves with oil exports making up 30 percent of the UAE’s total GDP. However, the global pandemic that brought a technological revolution worldwide along with the expected decline in the reserves of oil and natural gas has brought to light new ways of generating revenue for the UAE. Hence, the UAE along with other GCC states are now diversifying their economic strategy and focusing more on the digital economy.

With more than a hundred percent smartphone diffusion rate, the UAE is all set to bring in the needed innovations in the technology sector through the medium of artificial intelligence. It is consequently expected that the present contribution of the digital economy to the UAE’s GDP, which is 4.3 percent, is only remarkably going to boost in the subsequent years.

The UAE Government had previously introduced the UAE strategy for the Fourth Industrial Revolution during the Government’s Annual Meetings back in September 2017 which addressed the urgency to improve economic security and structure with the help of blockchain technology and digital payments in financial transactions and services.

Organized by Khaleej Times in Dubai, at the DigiPay 2021 summit, Director of the Artificial Intelligence, Prime Minister’s Office, UAE, Saqr bin Ghalib, addressed the questions referring to the recent improvement in digital payments and the role of AI in this regard. He also affirmed that “The government has mandated doubling the size of the digital economy within the country in the next ten years.”

The Dubai Chamber for Digital Economy was also founded to revolutionize Dubai and the UAE as the hub of the global economy by making considerable investments in the area of upcoming technologies and the internet economy.

In the next ten years, artificial intelligence is expected to contribute up to $320 billion to the Middle East economy. Hence, the UAE’s tireless efforts on diversification of e-commerce and the advancement plans for its IT infrastructure look promising regarding the economic boost as well as global recognition as a center of the international economy.

Does this mean that the digital economy is exempted from VAT?

The answer is no, however, there are several different conditions that are discussed in the FTA’s issued guidelines for VAT on e-commerce that might result in 0% VAT.

VAT is applicable to e-commerce sales just like it is on traditional sales that had a physical location for the purchase of goods and services whereas e-commerce sales are done electronically without the need for the physical presence of buyer or seller. The basic VAT rules regarding transactions, registrations, and filing apply to both types of sales alike.

The only differences may arise (as further explained in the FTA’s guide) regarding the mandatory or voluntary registration depending on whether a person has a residence in the UAE or not, and whether the place of supply is inside the UAE or outside.

The FTA’s guide also elaborates upon the reverse-charge mechanism that aims to level the playing field between the supplies of the supplier outside and the supplier inside the UAE so that the local suppliers aren’t subjected to any biasedness.

How can ACCBOOKS assist you in taking care of your e-commerce business?

As the digital economy is still an unfamiliar territory to be explored, the VAT and accounting of digital products and transactions could be challenging. ACCBOOKS is a team of brilliant professionals who are experts in the field of VAT, accounting, and auditing, bringing you the best solutions for your business’s unique needs. Their team of advisors and consultants ensure that you are aware of any new policies that are introduced to this developing field of the digital economy and suggest how you can mold your business structure accordingly to best play the policies for your business’s good. is a leading accounting firm in Dubai providing peerless vat services in Dubai, UAE.

Leave a comment

Scroll to top