Social media influencers in the UAE are subject to VAT
Bloggers, internet influencers, and vloggers have created an entirely new sector in the last decade. Take note: it’s a very profitable one. Many of them began as social media content creators as a pastime, posting blogs, images, and/or videos. And it’s quickly turned into a full-time job for them! In fact, rather than being footballers or pop stars, many children nowadays aspire to be ‘influencers’ or ‘YouTubers.’
In general, social media influencers or performers are individuals who use their online presence to affect the thoughts, decisions, and behaviors of consumers or their “following,” whether through social media postings, videos, or articles. They are taxed in the UAE, and that is what we will discuss in this article.
What is the tax rate for social media influencers in the UAE?
In the UAE, there is no personal income tax, which is beneficial to the industry. Services offered by social media influencers and entertainers, on the other hand, are subject to VAT at the regular rate. The standard VAT rate in the United Arab Emirates is 5%.
As the country’s business grows, it’s becoming increasingly important for influencers to record their earned money. They will have to pay the price if there is an oversight. Simply put, if you appear or act as if you are conducting a business, you must register for VAT with the Federal Tax Authority.
What/Which influencers are going to be taxed?
Yes, VAT registration is necessary for the UAE for both full-time and part-time social media content creators. This means that even if you work for a business and spend your free time creating material, you must still record your profits, particularly those obtained online.
The amount of VAT you must pay is determined by your annual income. In the United Arab Emirates, AED 375,000 is the necessary VAT registration threshold. If your yearly taxable supplies or earnings exceed AED 375,00o, you must register for VAT under the FTA.
As an online influencer or self-employed person in the UAE who is required to register for VAT, you may be able to claim some expenses for the work you do, even if it is done online. This lowers the amount of taxable income you have. VAT refunds in the UAE, commonly known as VAT reclaim, can reduce your annual VAT bill. Performers on social media can claim costs for items like:
- Equipment e.g. cameras, laptops, and phones
- Phone and broadband bills
- Marketing costs
- Website expenditure
- Training or courses
Is payments-in-kind taxable under UAE VAT law?
Despite recent legislative developments, the lack of transparency makes distinguishing between organic content and paid partnerships extremely difficult for government authorities. In reality, there have been worries about social media influencers not disclosing what they have been compensated or paid in exchange for recommending products and/or services.
While it is relatively simple for UAE regulators to tax paid-for or sponsored content where a charge is agreed upon, the waters are unclear when it comes to payments-in-kind. This can take the shape of experiences or items that businesses supply to creators in exchange for contractual deliveries. Payments-in-kind include everything from shoes to food blenders. If a present is given in exchange for an endorsement, it is almost always a payment-in-kind.
As a result, the UAE FTA requires artists to declare the financial worth of products received as payments-in-kind on their tax returns. Creators must refer to agreements from which they were provided in order to verify the costs of specific services and commodities. It is critical for influencers and performers to be aware of this before entering into a contract. They must save actual copies of their agreements in case they are questioned by tax officials if the influencers are audited.
How can influencers process their VAT registration in UAE?
The following documents are required to process VAT registration for influencers in the UAE:
- Copy of the trade license as a social media influencer
- Emirates ID
- Bank account details, IBAN
- Details of annual taxable supplies for the past twelve months (audited reports, balance sheets, bank statements)
- Projected expenses and revenues for the following thirty days
- List of countries you are doing business with
- Details of your social media activities and income
- Your registered address
It’s important to note that you should have the aforementioned paperwork available before beginning the VAT registration process. The process can be simplified with the assistance of regulated tax agents in Dubai, who can collect, examine, and advise you on the essential documentation for VAT registration.