Ministerial Decision No. 26 of 2023 — UAE VAT Electronic Commerce Record Keeping
Ministerial Decision No. 26 of 2023, issued on 22 February 2023 by the Minister of State for Financial Affairs, sets out the criteria and conditions under which a supply is classified as an electronic commerce supply for VAT purposes in the UAE. Operating under Clause 5 of Article 72 of the VAT Executive Regulation (Cabinet Decision No. 52 of 2017), this Decision directly governs the record-keeping obligations that taxable persons must meet when they sell goods or services through digital channels. Abdelhamid & Co. Certified Public Accountants & Auditors LLC SP — UAE Ministry of Economy Licence LC0106-01, FTA Tax Agent TAN: 30003958, TAAN: 20033908 — assists UAE businesses in meeting all VAT compliance obligations arising from e-commerce activities.
Key Facts — Ministerial Decision No. 26 of 2023
- Decision number: Ministerial Decision No. 26 of 2023
- Issued: 22 February 2023
- Effective: From date of publication in the Official Gazette
- Legal basis: Clause 5, Article 72, Cabinet Decision No. 52 of 2017 (VAT Executive Regulation)
- Purpose: Define criteria for e-commerce supplies and record-keeping obligations
- Administered by: Federal Tax Authority (FTA) via EmaraTax
What Is an Electronic Commerce Medium Under UAE VAT?
Article 1 of the Decision provides a broad statutory definition: an Electronic Commerce Medium is any website, portal, gateway, interface, platform, marketplace, programme interface (API), or similar application that facilitates the sale of goods or services. The definition expressly includes electronic platforms, social media stores, and electronic applications. This deliberately wide scope ensures that no digital sales channel — whether a bespoke e-commerce website, a third-party marketplace, or an Instagram shop — falls outside the regulatory framework.
The term captures both business-to-consumer (B2C) and business-to-business (B2B) digital transactions, meaning both retail e-commerce operators and wholesale digital platforms are subject to the Decision's requirements. Any UAE-registered taxable person conducting trade through such channels must assess whether their supplies meet the four-part test in Article 3.
The Four Criteria for an Electronic Commerce Supply (Article 3)
For a supply to qualify as an electronic commerce supply — and thereby trigger the specific VAT record-keeping obligations — all four of the following conditions must be met simultaneously:
- Criterion (a) — Listing or advertising: The goods or services are listed or advertised on an Electronic Commerce Medium.
- Criterion (b) — Ordering through the medium: The goods or services are ordered through the Electronic Commerce Medium, regardless of whether payment is completed online or offline.
- Criterion (c) — Delivery for goods: In the case of goods, they are delivered to a customer-specified location that is neither owned nor operated by the supplier.
- Criterion (d) — Automated provision for services: In the case of services, the service is provided — or the right to receive it is granted — with minimal or no human intervention.
Each criterion serves a distinct purpose. Criterion (a) and (b) confirm that the transaction is digital end-to-end in terms of marketing and ordering. Criterion (c) distinguishes true e-commerce goods fulfilment from click-and-collect or supplier-operated delivery services. Criterion (d) targets digital and automated services such as software licences, streaming, cloud services, and electronic subscriptions, setting them apart from services that require substantial human delivery.
Why the Payment Method Does Not Matter
A key clarification in Article 3(b) is that the supply qualifies as electronic commerce regardless of whether payment is made online or through another channel. A customer ordering through a website but paying by bank transfer, cheque, or cash on delivery does not change the VAT classification of the supply. This prevents businesses from artificially excluding supplies from the e-commerce framework by routing payment through offline methods while keeping the ordering process digital.
Record-Keeping Obligations for E-Commerce Suppliers
Taxable persons whose supplies meet all four criteria are required under Article 72 of the VAT Executive Regulation to maintain detailed records of their electronic commerce supplies. These records must enable the FTA to verify the VAT treatment of each supply, the consideration received, and the time of supply. In practice, businesses should retain:
- Order confirmations and invoices generated by the Electronic Commerce Medium
- Proof of delivery location (for goods) confirming the customer-specified address
- Evidence that services were provided with minimal human intervention (for digital services)
- Payment records, even where payment was made offline
- Platform or API transaction logs and export reports
The standard VAT record-keeping retention period of five years under Article 78 of the VAT Executive Regulation applies to all e-commerce records. Failure to maintain adequate records exposes businesses to administrative penalties under the Federal Law No. 7 of 2017 on Tax Procedures and the penalty schedule in Cabinet Decision No. 49 of 2021.
Practical Impact on UAE E-Commerce Businesses
For UAE businesses operating online stores, marketplaces, SaaS platforms, or digital content channels, the Decision has direct compliance implications. Even a traditional goods supplier that begins listing products on a third-party marketplace such as Amazon UAE, Noon, or a social media channel will become subject to e-commerce VAT record-keeping obligations the moment all four criteria are met. Similarly, any SaaS company, streaming platform, or online learning provider delivering services automatically to customers falls within the definition of criterion (d).
Businesses should review their current VAT compliance procedures to confirm that their accounting and ERP systems capture the data required to demonstrate compliance with Article 3. Where systems are inadequate, upgrades or supplementary data capture processes should be implemented before the next FTA VAT audit cycle.
How Abdelhamid & Co. Assists UAE E-Commerce Businesses
Our VAT team provides targeted support for businesses affected by Ministerial Decision No. 26 of 2023, including:
- Classification review — assessing whether your current digital sales channels meet all four criteria in Article 3
- Record-keeping gap analysis — identifying what records you hold versus what the FTA requires
- VAT return review for e-commerce supplies — confirming correct tax period, time of supply, and rate application
- Systems advice — guidance on configuring ERP, e-commerce, and accounting platforms to capture compliant data
- FTA audit support — representing your business and responding to FTA information requests related to e-commerce records
Frequently Asked Questions
What is Ministerial Decision No. 26 of 2023 about?
Ministerial Decision No. 26 of 2023 defines the criteria and conditions under which a supply of goods or services is classified as an electronic commerce supply for UAE VAT purposes. It implements Clause 5 of Article 72 of the VAT Executive Regulation, which requires taxable persons making e-commerce supplies to keep specific records of those supplies.
Does the method of payment affect whether a supply is classified as e-commerce?
No. Under Article 3(b) of the Decision, a supply is classified as electronic commerce if it is ordered through an Electronic Commerce Medium regardless of whether payment is made online or offline. A cash-on-delivery order placed through a website is still an electronic commerce supply.
Does a social media store qualify as an Electronic Commerce Medium?
Yes. The definition of Electronic Commerce Medium in Article 1 expressly includes stores in social media and electronic applications. A business selling goods through Instagram Shop, WhatsApp Business, or similar social commerce channels is operating an Electronic Commerce Medium and must assess whether its supplies meet the four criteria in Article 3.
Which services fall under criterion (d) — minimal or no human intervention?
Services delivered automatically without material human involvement fall under criterion (d). Examples include software-as-a-service (SaaS), streaming subscriptions, cloud storage, digital downloads, automated e-learning courses, and API-delivered data services. Services requiring professional expertise or significant human interaction — such as legal advice or consulting calls — generally do not meet this criterion.
How long must e-commerce VAT records be kept?
The standard VAT record-keeping retention period of five years applies, as set out in Article 78 of the VAT Executive Regulation (Cabinet Decision No. 52 of 2017). This means all records of e-commerce supplies — orders, invoices, delivery evidence, and payment records — must be retained for five years from the end of the tax period to which they relate.
What penalties apply for failing to keep proper e-commerce VAT records?
Failure to maintain VAT records in accordance with the Executive Regulation is subject to administrative penalties under Cabinet Decision No. 49 of 2021 and the Federal Law on Tax Procedures. Penalties for record-keeping failures can range from AED 10,000 for a first offence to AED 50,000 for a repeat offence, in addition to any tax adjustments arising from the lack of supporting documentation during an FTA audit.
Last reviewed: May 2026