Tax Applicability for Artists and Social Media Influencers in UAE

Artists and Social Media Influencers in the UAE

The UAE Federal Tax Authority (FTA) confirms that the supplies provided by social media influencers(SMIs) and artists are subject to Value Added Tax (VAT) in the UAE. A new information bulletin was issued, whereby the guidelines of the regulation were explained. According to the guidelines issued by the FTA for Artists and Social Media Influencers in the UAE, the VAT regulations apply to:

Artists: Individuals who make supplies as performers, singers, dancers, stage artists, make-up artists, DJs, poets, songwriters, etc.
Social Media Influencers (SMIs): Individuals providing services through social media to promote products and services, like bloggers, YouTube hosts, etc.

The above-mentioned services, as provided by Social Media Influencers (SMIs) in the UAE, are subject to VAT in the UAE, which includes:

Any online promotional activities performed on behalf of other businesses, like promoting a product or business by featuring them in the blog, video, or social media post.
Any physical appearances, marketing, and advertising-related activities
Providing access to any SMIs' network on social media.
Any other services that the SMIs may provide for a consideration.

Income from sponsored posts is a common revenue stream for influencers.

In addition, the FTA bulletin states that if an Artist or SMI incurs any cost to make a supply that recovers the cost from its client, such reimbursement also falls within the scope of VAT services in the UAE. The artists or SMIs based in the UAE who make taxable supplies can thus register for VAT in two ways, according to the value of taxable supplies. If a social media influencer's annual income exceeds AED 375,000, they are required to register for VAT with the Federal Tax Authority.

Mandatory registration if the value of their taxable supplies and imports in the last 12 months exceeded or is expected to exceed in the next 30 days, the mandatory registration threshold of AED 375,000.
Voluntary registration if the value of their taxable supplies and imports in the last 12 months exceeded or is expected to exceed in the next 30 days, the voluntary threshold of AED 187, 500.

Non-resident artists and social media influencers in the UAE are also required to register for VAT if they make taxable supplies with the place of supply in the UAE, and no other person is obligated to account for VAT on those supplies. There is no registration threshold for non-resident artists or social media influencers in such instances. Although artists and social media influencers making taxable supplies are eligible for full recovery of the input tax, there are certain blocked items as listed in the FTA bulletin for VAT on supplies by artists and SMIs in the UAE:

Certain entertainment services
Motor vehicles that are rented, purchased, or leased for personal use.

If an artist or influencer receives goods in exchange for their services, the goods are treated as consideration for the services. Influencers need to issue VAT-compliant invoices for their services when registered for VAT. Influencers providing paid promotional services must issue VAT-compliant invoices and accurately calculate VAT on their services. In such cases,

If the consideration is entirely or partly non-monetary, the value of supply is the monetary part plus the market value of the non-monetary part, less the VAT amount.
If the person supplying the products to the artist or influencer in the UAE is registered for VAT, they are required to account for VAT on the supply of goods.

Due to the complexity of the barter system (goods and services), FTA suggests that the VAT implications of such supplies are to be assessed on a transaction-by-transaction basis. The FTA bulletin on VAT on artists and social media influencers in the UAE also clarifies that, even if an individual holds 100% shares in a company, they are still considered distinct from the company and are only responsible for accounting for VAT on their supplies. Similarly, a company is required to account for VAT only on the services or supplies made by the company and not the individual. In cases where the artists or social media influencers have an agent who acts between them and their clients, the FTA asserts that the VAT obligation for the artists and influencers depends on whose name the agent is acting on. Professionals specialising in tax can help influencers understand their tax obligations and optimise tax positioning. If influencers do not register for VAT by the deadline, they may incur a penalty of AED 20,000. Accordingly:

If the agent acts between the artists or social media influencer and the client on behalf of or in the name of the artist or media influencer, the artist or the influencer is accountable for VAT
If the agent acts between the artist or social influencer and the client in their name and contracts with the artist or social media influencer in one hand, and with the clients on the other hand the artists or influencer is obliged to account for VAT on the amount charged to the agent, while the agent is obliged to account for the VAT on the amount charged to the client.

If an Artist or Social Media Influencer contracts with a UAE-based company to provide advertising services outside the UAE, the service would attract standard VAT at 5% even if the advertising service is performed outside the UAE.

FAQ (Frequently Asked Questions)

Q1. What is the tax code for a social media influencer?

In the UAE, social media influencers are generally considered self-employed individuals or sole proprietors. They are subject to Corporate Tax (effective from June 2023) if their net business income exceeds AED 375,000 annually. For VAT purposes, if their taxable supplies exceed AED 375,000 annually, they must register for VAT and charge 5% VAT on their services. There is no specific "tax code" but they fall under general business income provisions. Influencers must maintain thorough records of all earnings, expenses, and agreements related to their operations. Influencers should implement a system for managing financial records to streamline tax reporting.

Q2. Who is exempted from VAT in the UAE?

The following are exempt from VAT in the UAE:

Certain financial services
Residential property rentals and sales (in most cases)
Local passenger transport services
Some educational and healthcare services (depending on nature and licensing)

Businesses with annual taxable supplies below AED 187,500 are also not required to register for VAT.

Q3. What is the TDS for influencer marketing?

In India, payments made to social media influencers may attract TDS (Tax Deducted at Source) under Section 194J or 194C of the Income Tax Act, typically at 10%. However, this does not apply in the UAE, as the UAE currently does not implement TDS. UAE tax regulations focus on corporate tax and VAT, not withholding tax like TDS.

Q4. Are social media influencers paid?

Yes, social media influencers are paid for:

Promoting products or services
Collaborations with brands
Sponsored content
Affiliate marketing and ad revenue

Their income can vary widely depending on their reach, engagement, niche, and brand partnerships.

To learn more about Tax Applicability for Artists and Social Media Influencers in UAE, book a free consultation with one of the Flyingcolour team advisors.

Disclaimer: The information provided in this blog is based on our understanding of current tax laws and regulations. It is intended for general informational purposes only and does not constitute professional tax advice, consultation, or representation. The author and publisher are not responsible for any errors or omissions, or for any actions taken based on the information contained in this blog.