VAT RULES COULD MEAN END TO FREE TRIPS FOR INFLUENCERS

▶ Promoters of products must take into account value of gifts received as compensation

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

The Federal Tax Authority issued a bulletin with advice to influencers and artists this week, reminding them that 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 online promotional work, including for a product, company or venue.

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

They must also take into account the cost of any products or experiences they are given in return for their services, the FTA said.

Experts called the rules game-changing.

They said it could mean 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,” said 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.

“The implications are significant. At the same time, where the person supplying the goods to the artist or influencer 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 what is known in law as a barter transaction.

“If an influencer gets something in return, like free products, it will be considered a payment for services,” said Bastiaan Moossdorff, senior VAT adviser at Baker & McKenzie Habib Al Mulla.

“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.”

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