Effortlessly decouple commission income from principal sales to streamline VAT accountability and invoice logic.
A UAE-based digital platform facilitating food delivery and in-restaurant dining services approached us to assess its VAT obligations and structuring needs. The business model involved onboarding restaurants onto a mobile application, through which customers could place food orders for delivery or dine-in reservations. The platform earned revenue by charging a commission to restaurants for access and order facilitation, while the restaurants fulfilled the orders and collected payment for the food.
Although the platform was not VAT-registered at the time of consultation, it anticipated exceeding the VAT registration threshold and sought guidance on its registration requirements, invoice structuring, VAT collection processes, and compliance treatment under UAE VAT law. The platform also wanted to understand its obligations with respect to issuing invoices to end-customers on behalf of restaurants.
Our initial analysis focused on defining the nature of taxable supplies. In accordance with Article 2 of Federal Decree-Law No. 8 of 2017, VAT is imposed on taxable supplies made within the UAE by taxable persons in the course of conducting business. In the case of this platform, the only taxable supply made by the business is the commission earned from restaurants; the revenue from food sales does not belong to the platform and thus is not part of its taxable turnover.
With reference to Article 19 of the Decree-Law, we clarified that the platform would be mandatorily required to register for VAT once its taxable supplies exceed AED 375,000 within a 12-month period, or could register voluntarily upon exceeding AED 187,500. VAT would only be applicable to the platform’s commission income and only from the effective date of registration as specified in the TRN certificate. Until registration, VAT must not be charged on any invoice.
A key complexity in this case concerned the issuance of customer invoices for food sales. Many platform-based businesses assume the responsibility of delivering receipts to end-customers, but the question arises: does this make the platform the supplier in the eyes of the Federal Tax Authority? We resolved this by referring to Article 9 of the Decree-Law, which provides:
“The supply of goods and services through an agent acting in the name of and on behalf of a principal is considered to be a supply by the principal and for his benefit.”
“The supply of goods and services through an agent acting in his own name is considered to be a direct supply by the agent and for his benefit.”
In practical terms, this means that if the platform issues invoices on behalf of the restaurant, clearly stating the restaurant’s name, TRN, and acting as an agent, then the VAT liability remains with the restaurant. However, if the platform were to issue the invoice in its own name, it would be deemed to have made the supply itself and thus become liable to collect and report VAT on the full food price. We advised that the platform may facilitate invoicing, but must ensure that all customer-facing invoices for food are issued in the restaurant’s name. The platform should only issue invoices in its own name for its commission income, once VAT-registered.
Additionally, we recommended that the platform collect and verify the Tax Registration Number (TRN) certificates from each participating restaurant to confirm their VAT status. This allows the platform to distinguish between VAT-registered and non-registered restaurants and apply VAT appropriately on food sales when facilitating invoices.
We also advised on the treatment of restaurants located in designated free zones versus the mainland or other free zones. While transactions involving designated zones may require further analysis under special place-of-supply rules, the general principle is that all UAE-based food supplies are standard-rated unless explicitly exempted or zero-rated. In all cases, the platform’s commission for service provision to restaurants based in the UAE is subject to 5% VAT once registered.
For invoicing, we helped the platform design a dual-invoice model: one invoice issued to the customer on behalf of the restaurant, and another invoice from the platform to the restaurant for its commission. Each invoice would comply with the format required under Article 59 of the Executive Regulation, including TRNs, sequential numbering, itemized services, VAT amounts, and payment details.
Finally, we prepared the business for quarterly VAT return filing, once registered. The platform would be responsible for reporting only its taxable commission income, along with any recoverable input VAT. VAT returns would be due on the 28th day following the end of each tax period, as per Article 72 of the Decree-Law.
This case underscores the importance of correctly applying agency rules under Article 9 to prevent unintended VAT liabilities on third-party supplies. By ensuring that the platform acts clearly on behalf of restaurants — and not in its own name — and by separately invoicing its own commission, the business preserved both legal compliance and operational clarity under UAE VAT regulations.
