There have been many developments in the Online Gaming Industry (also known as the E-Gaming Industry). In the current scenario, the E-Gaming industry is one of the growing industry, and more and more players are coming into the market. this has been possible due to the release of multiplayer games such as PUBG, Free Fire, Fortnight and many others.
The E-Gaming industry also saw a boom due to the Covid-19 pandemic, due to which the whole world was stuck in their homes. The isolation of the people was a very big factor in the increase in online games’ engagement. The gaming markets have seen a growth of unprecedented levels within the last five years.
Understanding E-Gaming and VAT
The location of the Game Developers, Game Publishers and the Players play a very crucial role in determining will be the total Value Added Tax (VAT) that is applicable to them. There are two different scenarios according to which the VAT can be levied on such business.
- The Game server can be in the local jurisdiction, and the players can be in a different jurisdiction.
- The Players can be in the local jurisdiction, whereas the Game services are in a different jurisdiction.
The different scenarios can lead to different treatment for each of the companies. This is why it is recommended that an E-Gaming company should take the assistance of an Expert who will simplify the VAT procedure for them.
VAT Registration for E-Gaming Industry
According to Article 18 of the VAT Decree-Law in the UAE, any player of E-Games in the UAE is downloading or buying a game, then the non-resident who is the publisher of the game is required to register for VAT and also comply with the legislation.
In certain scenarios, the Reverse Charge Mechanism is applicable in which the recipient of the goods needs to account for the VAT instead of the supplier of the goods. This Reverse Charge Mechanism is applicable in the following cases:
- The supplier of the goods (Game) does not reside in the United Arab Emirates.
- The supplier has not been registered for Value Added Tax, but the recipient of the goods resides in the United Arab Emirates.
In cases where the player of the game is an individual who is not taxable in the UAE, then the gaming operator needs to account for VAT in the country. However, if the player is a VAT registered individual, then the reverse charge mechanism comes into play, and the burden of the tax is now upon the player.
VAT for Streaming Platforms and Gaming Subscribers
Now a day the games are being subscribed to by a number of people, which helps players not physically to buy a game. This also helps the players all over the world to connect from different parts of the world. In case the game operator is located in the UAE but provides its services to player or subscriber outside the country, then the operator needs to register for VAT.
With the increase in technology and better speeds of the internet, the market for streaming games has also increased. We can find many gamers who stream their games as they play. If a player is streaming games, then the location where the business is situated plays a vital role.
If the customers of the streaming service are located in the UAE, then the streaming platform is eligible to pay a standard VAT of 5%. This VAT will not be applicable to the streaming service if the customers of the platform are situated outside the country.
How can JAXA Chartered Accountants Help?
The E-Gaming industry is a developing industry with a lot of potentials, but still, there are many challenges which it has to overcome. It is very important for a company to understand the implications of VAT in the company, but there are many factors that have to be kept in mind. JAXA Chartered Accountants will help the management in understanding how VAT works in the UAE.
JAXA Chartered Accountants is an ISO 9001:2015 certified company, and the experts at JAXA will help the company make the most of the VAT and any other Taxation (if applicable). JAXA also provides many other services for your business, such as Accounting Services and Bookkeeping Services, Auditing and Assurance Services, Payroll Services and many more. TO know more about the services provided by JAXA, feel free to Contact US. We will be glad to assist you.