THINGS DIGITAL MEDIA EXPERTS SHOULD KNOW ABOUT ACCOUNTING AND UAE VAT returns

 

Being an accounting and VAT consultant in UAE over past few years, we have got change to work with clients who are engaged in digital media segment. We have helped them with their accounting and UAE vat returns. The businesses are engaged in SEO, digital marketing, content creation, public relation, branding and advisement for clients.  These sounds simple as a business if talk from accounting perspective, however, we felt it is worth talking about few points which all the businesses engaged in digital media should keep in mind:

1. Client Money or Reimbursement:  Often digital media businesses (mainly those engaged in social media marketing and public relations) receives money from their clients for payment to various networks (such as Facebook, Google, LinkedIn, etc.) on their behalf.  This money should be kept separate and marked separately in accounts. It has to be marked as client’s liabilities towards these vendors. This money should not be added to or mixed up with the fee which is charged to their clients by digital media businesses.

In our experience, mix up of client money and fee money are often causes for dispute and in extreme cases leads to severance of business relation between digital media businesses and their clients.

2. Using Freelancer for specific task:  Many digital media business (mainly in small and medium size business segment) uses freelance staff to carry out specific task for either lack of sufficient full time work to enable them to hire or for lack of available technical staff. 

It is important to note here, that while it is permitted to use staff on free-lance basis, there are clear guidelines on how to use these people with valid work document issued by appropriate local authorities. It is important to note that they should have a valid license to provide you with invoice.

3. VAT Rules: VAT impacts all businesses in the UAE. However, there are some specific areas which needs attention for businesses engaged in digital media:

• Disbursements: As we mentioned in the first point, keep client money separate from digital media business fee income.  While the digital media fee income requires levy of applicable VAT, invoices issued by vendors to client are pass through as a disbursement and are not subject to VAT in most of the cases.
• Buying Online Media items: Digital media businesses often incur expenses abroad for various purposes  like buying images, software subscriptions, getting work done, advertisements, etc.  In most of the cases these vendors are not registered in the UAE and this necessitates application of reverse charge by the digital media businesses. It important that you apply reverse charge appropriately and updated your UAE vat returns correctly in this regard.
• Client outside UAE: Many a time UAE digital media business serves foreign clients for various campaigns.  It is important to note that invoices to foreign customers are subject to VAT albeit at Zero rate. The invoices here should be made with extreme care and as per VAT rules of UAE. Also while you file your UAE vat returns it should be appropriately entered in it.

We hope these points are useful to digital media business owners in their ongoing business decision.  Please also note, though we are specifically addressing digital media business here in this article, the principals would apply to many other service businesses. We would be explaining this in our upcoming blogs. 

Accountant’s Box is accounting and VAT consultant in UAE. We can assist you in registering your company for VAT in the UAE. Our dedicated team will provide all necessary guidance on VAT registration and take care of the whole registration process. For information, you could reach us at info@accountantsbox.com.