Tax Applicability for Artists and Social Media Influencers in 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 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 UAE are subject to VAT in the UAE which includes:

1. 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.
2. Any physical appearances, marketing, and advertising related activities
3. Providing access to any SMIs’ network on social media.
4. Any other services that the SMIs may provide for a consideration.

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 in the UAE.

The artists or SMIs based in the UAE who make taxable supplies can thus register for VAT by two means according to the value of taxable supplies:

• 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 the taxable supplied 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 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. 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 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 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 to account VAT on their personal 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 VATobligation for the artists and influencers depends on whose name the agent is acting on. 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 social 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 own 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.