Be it education, banking or entertainment, services industry is huge. Where there is no delivery of goods, that is characterised as service industry. And the recent application of VAT in the UAE covered both the categories with few exemptions.
When it comes to entertainment, Dubai is second home to dozens of celebrities – especially from Bollywood – who come here frequently to perform in front of thousands of fans and also in private parties invited by individuals. This entertainment sector is subject to five per cent value-added tax (VAT).
But the question arises whether all those Bollywood and Hollywood celebrities will also be subject to new tax for their services – read performances – provided in the UAE.
When asked tax experts, they said, as per UAE laws, Bollywood and Hollywood stars who want to continue performing here in the UAE will have to register with the Federal Tax Authority to obtain Tax Registration Number in order to pay VAT if the invitee is not registered with FTA.
As per UAE law, Naveen Sharma, chairman, The Institute of Chartered Accountants of India (Dubai Chapter), says every person, who does not have a place of residence in the UAE or any GCC country and who is not already register, shall register mandatorily if he makes supplies of goods and services in the UAE, and where no other person is obligated to pay the due tax on these supplies in the UAE.
“If a person is not a resident in the UAE and is required to register in accordance with the provisions of the Decree-Law, the Authority shall register him with effect from the date on which he or she started making supplies in the UAE, or from such earlier date as agreed between the Authority and the person, whether or not person notifies the authority of the liability to register for tax.
“Considering the above legislation of the law, it can be interpreted that, a person who is a Bollywood or a Hollywood celebrity, and not a resident in the UAE, comes to perform any service in the UAE will have to register mandatorily in case no other person is obligated to pay the VAT on the services performed by them in the UAE,” Sharma said.
The celebrities would have to register in his or her name as an individual with the Tax Authority by submitting the required details online on the FTA portal, he added.
Most – if not all – of the Bollywood celebrities of modern era have performed in the UAE and continue to perform. Even Hollywood stars are also invited time and again to perform in the UAE.
A PricewaterhouseCoopers report had forecast that the UAE’s leisure and entertainment market potential would reach 45 million visitors by 2021, with international tourists accounting for 30 million, while residents and friends and relatives of residents total a further 15 million.
Dilip Jain, Principal – VAT, Nimai Management Consultants, noted that in cases of celebrities performing in UAE, the organising event companies who bring celebrities are likely to be registered for VAT and would pay tax on the amount paid to celebrities.
“Where the performance of such services exceeds or is likely to exceed the threshold limit of Dh375,000 in 12 months, and the payment is received from an unregistered persons, then the celebrities will have to register for a Tax Registration Number with Federal Tax Authority and pay VAT. They can also appoint a legal representative to register on their behalf.”
According to Shailesh Khandelwal, CEO and founder, Shailesh Khandelwal Accounting & Book Keeping Services, the UAE VAT law states that if the taxable person imports concerned goods or services for the purpose of his business, then he shall be accounting for due tax in respect of these supplies.
But if celebrities or other service providers offer services to unregistered or non taxable persons in the UAE, they need to register themselves in the UAE. Otherwise, this will result in contravention of the UAE VAT law.
“Celebrities often come to UAE to attend various personal events on the request of residents and citizens of UAE and are paid for this gesture.”
However, the mandatory and voluntary threshold limits of Dh375,000 and Dh187,500, respectively, for registration under UAE VAT law are not applicable to non-resident suppliers of goods and services. Thereby, all non-resident suppliers supplying goods or services, where article 48 is not attracted, have to register and need to comply with UAE VAT law provisions even if the value is less than the threshold limits, Khandelwal added.