Selling online looks borderless, but UAE VAT is not. Whether you charge 5%, charge nothing, or have to register in the first place turns on two questions that e-commerce and digital businesses often get wrong: what exactly are you supplying, and where is it treated as supplied. Goods and electronic services follow different rules, and the place of supply decides who accounts for the tax. Here is how to read your own sales.
Goods sold online: ordinary VAT, delivered rules
An online shop that ships physical goods is, for VAT, a normal retailer. A sale of goods located in the UAE to a UAE customer is standard-rated at 5%. Goods exported to a customer abroad can be zero-rated where you hold the export evidence, and goods bought in from overseas bring VAT in at the border through import VAT or the reverse charge. The website is just the shopfront; the VAT follows the goods.
Electronic services: taxed where they are used
Digital products behave differently. Software, SaaS subscriptions, streaming, apps, online courses, e-books, hosting and digital advertising are electronic services, and they carry a special place of supply rule: they are taxed where the service is used and enjoyed, not where the supplier sits. For a UAE user, that means UAE VAT is in point even when the seller is overseas.
| Who is selling to whom | VAT treatment |
|---|---|
| UAE business sells e-services to a UAE consumer | Charge 5% UAE VAT |
| UAE business sells e-services to a business abroad | Usually zero-rated as an export of services, if conditions are met |
| Overseas seller supplies e-services to a UAE consumer | Overseas seller must register and charge 5% UAE VAT |
| Overseas seller supplies e-services to a UAE business | UAE business self-accounts under the reverse charge |
The trap for overseas sellers
A non-resident business that makes a taxable supply to a UAE consumer, with no UAE business to account for the tax in its place, must register for UAE VAT from the first dirham. There is no registration threshold for a non-resident in that position. Foreign app developers, subscription platforms and course sellers reaching UAE consumers are squarely inside this rule, and many only discover it on a review.
The registration threshold protects resident businesses. A non-resident selling digital services to UAE consumers does not get it: the duty to register starts at the first sale.
Marketplaces and who the supplier is
When you sell through a platform, the VAT can land on you or on the platform depending on who is treated as making the supply to the final customer. Agency, disbursement and reseller arrangements all read differently. Settle in writing who accounts for VAT on each leg before the sales start, because unwinding it later means issuing corrections on volumes of small transactions.
What to do about it
Map your catalogue into goods and electronic services, because they do not share a rule. For each stream, fix the customer type and location, since that decides whether you charge 5%, zero-rate an export, or sit under the reverse charge. If you are an overseas seller reaching UAE consumers, test your registration position now rather than after a query. Start with our VAT basics and how to register, then work through the reverse charge, zero-rated exports and VAT on imports for the legs that apply to you.
This article is general information and is not tax advice. It summarises rules that depend on your circumstances and may change, and should be confirmed against the current legislation and FTA guidance. We would be glad to help you work through what this means for your business.