UAE tax authority warns influencers that free gifts and experiences are taxable

Any influencer earning more than Dh375,000 annually must pay VAT – and "freebies" count towards the total, the Federal Tax Authority reiterated

Young female recording video  for social media

Influencers could be evading the UAE’s tax regime by failing to declare free gifts and experiences.

The Federal Tax Authority issued a bulletin with advice to influencers and artists this week, reminding them they must pay 5 per cent VAT if they earn more than Dh375,000 annually.

Services that are subject to the tax include any paid promotional work, such as plugging a product, company or place online.

Physical appearances and access to influencers’ networks on social media are also taxable, it said.

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When VAT was introduced influencers did not consider that they were doing business – even though some of them were making more than a government minister

However, they must also count the cost of any free products or experiences they receive in return for their services, the FTA said.

Experts called the rules “game-changing”.

They said it could herald the end of influencers accepting expensive holidays or gifts in return for promotion on their social media accounts.

“Holidays at some of these Maldives resorts cost up to Dh100,000,” Natasha Hatherall-Shawe, chief executive of Dubai marketing company Tishtash, who helps connect companies with influencers.

“And for unboxing, some people are getting Dh20,000 or even Dh50,000 of products a day.

“If this is the law, this is quite game changing.

“The implications are significant,” she said.

According to the bulletin goods that are received in return for services, such as phones, are treated as “consideration for the services”.

“Where the entire or part of the consideration is non-monetary, the value of the supply is the monetary part, plus the market value of the non-monetary part, less the VAT amount,” the Federal Tax Authority said.

“At the same time, where the person supplying the goods to the Artist or SMI in exchange for the services is registered for VAT, such person will also need to account for VAT on the supply of goods.”

Legal experts said influencers must pay attention to this area, which is known in law as a “barter transaction”.

“I think that’s something that is easily forgotten,” said Bastiaan Moossdorff, senior VAT adviser at Baker & McKenzie Habib Al Mulla.

“If an influencer gets something in return, like free products, it will be considered a payment for services.

“So you kind of need to estimate or determine the value of the payment you receive and you should include that in your threshold calculation.

“It is not purely monetary. It’s also non-monetary and it is something that can easily be forgotten.”

Saleh Alobeidli, a partner and legal technology expert at ICLO law firm, said all influencers should invoice their clients before being paid for any work.

“When VAT was introduced influencers did not consider that they were doing business – even though some of them were making much more money than even a [government] minister," he said.

“They considered their activities as being very personal to them.

“However, today, if you do anything as an influencer, or as an artist, as long as you are making any promotion of any work and someone is paying you for what you are doing, all of this money is subject to VAT."

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