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

Some UAE-based influencers have turned their work into lucrative business - but may have forgotten to pay VAT on both their earnings and the value of free goods and experiences. Getty Images

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.

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."

10 of UAE's best-known influencers

Iraqi-American beauty entrepreneur Huda Kattan pictured with British artist Sacha Jafri. Huda is one of the most successful self-made businesswomen in the Middle East today and is estimated by Forbes to be worth more than $500 million. She has lived in Dubai since 2008. Courtesy: Sacha Jafri

Karen Wazen has shot to stardom with her independent and offbeat fashion style. The British-Lebanese entrepreneur, married to Elias Bakhazi and living in Dubai, has eyewear, fashion and interior design business interests. Courtesy Madiyah Al Sharqi

Nuseir Yassin, known as Nas Daily, with girlfriend Alyne Tamir in a video about visiting Dubai as tourists. Born in an Arab town in Israel to a Muslim family, he has attracted a large following with his travel blogs about the Middle East. He speaks, Arabic, Hebrew and English, and his videos often have Hindi and Mandarin subtitles. The couple recently moved to Dubai Instagram / nasdaily

Emirati Anas Bukhash and his brothers early on realised the potential value of social media influencing. They now manage a large number of influencers out of their base in Dubai, supplying content to clients directly. Marta Lamovsek for The National's Luxury Magazine

Alex Hirschi, aka Supercar Blondie, is among the country's most recognisable social media stars. Her talent? Getting the fastest, brashest and ludicrously expensive supercars for review before her rivals. She went from newsreader and presenter for Dubai Eye radio to attracting a loyal following of more than 5 million. Courtesy: Supercar Blondie

Khalid and Salama Al Ameri are two of the most recognisble home-grown Emirati social media figures. Khalid, 37, from Abu Dhabi, is the son of a Scottish mother and Emirati father. He and Salama make fun videos about everyday Emirati life and seek to dispel some of the myths and stereotypes about life in the Gulf. Courtesy: Khalid Al Ameri

Rashed Belhasa, aka Moneykicks, hails from the wealthy Belhasa family, which has interests in engineering, retail and a well-known driving school. But he made a name - and cash - for himself with his extraordinary rare sneakers collection, buying and selling in a lucrative market. He recently tried his hand in the music business with his first single 'We Living Life'. Moneykicks / Instagram

Mo Vlogs poses for a photoshoot on the bridge to Meydan racecourse and hotel. He successfully tapped into online and social media commercials including for Huawei, one of the fastest growing mobile phone brands in the world. Courtesy: Mo Vlogs Youtube

Beirut-born make-up artist and businesswoman Joelle Mardinian runs one of the region's best-known cosmetic brands, Joelle. Courtesy: Banan Al Awneh

Narins Amara pictured with Mo Vlogs in a video about the couple buying their first home. With 5.8 million Instagram followers, the Syrian-Swede is best known for her successful cosmetic range. Courtesy: Narins Beauty