Gifts UAE influencers receive will now be subject to additional payment beyond the cost of the item or experience.
Earlier in March, the Federal Tax Authority (FTA) announced a Value Added Tax (VAT) that businesses working with influencers must settle if the influencer earns more than AED375,000 per year in freebies.
Instead of being perceived as a drawback to influencers, industry experts view this as another positive step by the UAE to give social media influencing as a profession more weight.
“We see this as another positive sign for the industry, the new announcement by the FTA gives more credibility to influencer marketing as a serious profession,” said Ahmad Bashour, executive director, ITP Live.
The UAE have been pioneers in recognising individual content creation as a legitimate career path first through the introduction of licences and now with this new VAT tax law,” he continued.
Annual government issued license became a requirement for anyone conducting commercial activities through social media in the UAE in 2019.
Ahmad Bashour, executive director, ITP Live.
More recently in March, the FTA saw that free holidays and similar gifts influencers receive in exchange for promoting the gifting company on their social media channels are a service-transaction and so should be taxed accordingly, explained Tyne Hugo, associate at local law firm BSA.
“From now on, if these influencers receive gifts in the amount of over AED375,000 per year, they need to register for VAT with the FTA and issue an invoice based on what the gift or experience would have cost a paying customer,” said Hugo.
“The company providing the gift will then be charged a 5 percent VAT which they would need to pay to the influencer who in turn will pay that to the FTA,” he continued.
Once they have registered for the VAT, influencers will need to issue an invoice for any freebie they receive, whether it is worth AED10 or 10 million, explained Hugo.
Tyne Hugo, associate at local law firm BSA.
The tax will be paid by the company offering the gift and so it won’t cost the influencer anything beyond administrative work for the invoices and a potential loss of businesses in the sense that “gift providers might not want to pay VAT and hence think twice before working with influencers,” said Hugo.
The only time it will cost the influencer money is when they are caught not complying with the law and are faced with penalties.
“We at ITP Live are supporting our influencers by referring them to tax lawyers who can help them sort out the needed paperwork if needed” said Bashour.
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