VAT on Telephone Calls and Telephone Card
VAT on Telephone Calls and Telephone Card
No VAT on Telephone Calls Cards.
UAE and GCC countries had implemented Value Added Tax system in the year 2018. The 1st of January 2018 was the first day of VAT collection.
The standard VAT rate for all taxable goods and services is 5%
But there are some items that do not have tax. These items are again categorized into two sections named ZERO VAT and VAT EXEMPTED
Zero VAT items are not having a tax on certain conditions. Whereas Exempted items do not at all have tax.
In the ZERO VAT items, one of the major services included is Telecommunication. This has different treatment in VAT calculation.
VAT on Telephone Calls and Telephone Card
Telephone service is taxable. All the landline and mobile calls are subject to VAT. The internet service is also having a 5% tax.
But Telephone cards that are used for making calls and internet service is not having VAT. It is under the Zero taxable category. But the service we use with that card is having a standard rate of tax of 5%.
To understand better, please see the situation below:
A Customer buys a Telephone or Internet card for AED 30/-. He needs to pay only AED 30/-. The credit balance in it is AED 30/-. He need not pay 5% tax. ( in normal case, the buyer need to pay AED 30 plus 5% – that is AED 1.50 = AED 31.50)
Now, He makes a call for AED 21/-. Here, the call is vatable. AED 20/- will go to Telecom company and AED 1/- will go to Federal Tax Authority.
That means the AED 30/- he paid for the telephone card is inclusive of tax.
In post-paid connections, the monthly bill comes with a separate tax amount of @5% according to the service we use. It is the same situation with internet bills as well.
But certain charity-related SMS we use through mobile phones and telecom services, there will be a non-taxable column where the 5% rate won’t apply.