In the VAT Law, the Taxable Event is the supply of goods or services within the tax jurisdiction and hence the importance of
A. What constitutes a supply of goods or services,
B. When (Time) of supply of goods or services,
C. Where (Place) of supply of goods or services,
D. Amount (Value) of supply of goods or services.
1. What is VAT or Value Added Tax
Article 1 of the UAE VAT Law defines the term “VAT” or “value added tax” to mean a tax imposed on the import and supply of Goods and Services at each stage of production and distribution, including the Deemed Supply.
2. What is Goods?
Article 1 of UAE VAT Law defines the term “goods” to mean Physical property that can be supplied including real estate, water, and all forms of energy as specified in the Executive Regulation of this Decree-Law.
3. What is Supply of Goods?
Under Article 5 of UAE VAT Law, the following shall be considered a supply of Goods:
a. Transfer of ownership of the Goods or the right to use them to another Person according to what is specified in the Executive Regulation of this Decree Law.
b. Entry into a contract between two parties entailing the transfer of Goods at a later time, pursuant to the conditions specified in the Executive Regulation of this Decree Law.
Under Article 2 of Executive Regulation of UAE VAT LAW, A transfer of ownership of Goods or of the right to use them from one Person to another Person shall include for instance the following:
a. A transfer of ownership of Goods under a written or verbal agreement for any sale;
b. A transfer of ownership for a Consideration in a compulsory manner pursuant to the applicable legislations.
Exclusion : a transfer of the right to use any assets shall not be treated as a supply of Goods unless the other Person is able to dispose of them as owner.
Under Clause 4 of Article 3 of Executive Regulation, the following shall be considered a supply of Goods:
a. A supply of water.
b. A supply of real estate including sale and tenancy contracts.
c. A supply of all forms of energy, which includes electricity and gas, including biogas, coal gas, liquefied petroleum gas, natural gas, oil gas, producer gas, refinery gas, reformed natural gas, and tempered liquefied petroleum gas, and any mixture of gases, whether used for lighting, or heating, or cooling, or air conditioning or any other purpose.
4. What is Services?
Article 1 of UAE VAT Law defines the term “services” to mean anything that can be supplied other than Goods.
5. What is supply of Services?
Under Article 6 of the UAE VAT Law, a supply of Services shall be every supply that is not considered a supply of Goods, including any provision of Services specified in the Executive Regulation of this Decree Law.
Under Article 3 of Executive Regulation, The supply of anything other than the supply of Goods shall be regarded as a supply of Services including any of the following:
a. The granting, assignment, cessation, or surrender of a right.
b. Making available a facility or advantage.
c. Not to participate in any activity, or not to allow its occurrence, or agree to perform any activity.
d. The transfer of an indivisible share in a good.
e. The transfer or licensing of intangible rights, for example rights of authors, inventors, artists, and rights in trademarks, and rights which the legislation of the State deems to be within such category.
6. What are the Exclusions from Supply of Goods and services?
Under Article 7 of the UAE VAT Law, he following shall not be considered a supply:
a. The sale or issuance of any Voucher unless the received Consideration exceeds its advertised monetary value, as specified in the Executive Regulation of this Decree Law.
b. The transfer of whole or an independent part of a Business from a Person to a Taxable Person for the purposes of continuing the Business that was transferred.
7. What are the rules relating to composite supply under VAT Law?
Under Article 8 of the UAE VAT Law specifies that the Executive Regulation (Article 4) of this Decree-Law shall specify the conditions for treating a supply made of more than one component for one price, whether such components are Goods or Services or both.
8. What are the rules relating to supply by an Agent?
Under Article 9 of the UAE VAT Law :-
a. 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.
b. The Supply of Goods and Services through an agent acting in his name is considered to bea direct supply by the agent and for his benefit.
9. What are the rules relating to supply by Government Entities?
Under Article 10 of the UAE VAT Law :-
a. A Government Entity is regarded as making a supply in the course of business in the following cases:
i. If its activities are conducted in a non-sovereign Capacity.
ii. If its activities are in competition with the private sector.
b. A Cabinet Decision shall be issued at the suggestion of the Minister determining the Government Entities and their activities that are considered as conducted in a Sovereign Capacity and instances where its activities are considered not in competition with the private sector.
10. What are the cases of deemed supply under the UAE VAT Law?
Under Article 11 of the UAE VAT Law, the following cases shall be considered as Deemed Supply :-
a. A supply of Goods or Services, which constituted the whole assets of a Taxable Person or a part thereof, but are no longer considered to be as such, provided that the supply was made without Consideration.
b. The transfer by a Taxable Person of Goods that constituted a part of his business assets from the State to another Implementing State, or from the Taxable Person’s business in an Implementing State to his Business in the State, except in the case where such transfer :
i. Is considered as temporary under the Customs Legislation.
ii. Is made as part of another Taxable Supply of these Goods.
c. A supply of Goods or Services for which Input Tax may be recovered but the Goods or Services were used, in part or whole, for purposes other than Business, and such supply shall be considered as deemed only to the extent of the use for non-business purposes.
d. Goods and Services that a Taxable Person owns at the date of Tax Deregistration.
11. What are the exceptions to deemed supply under the UAE VAT Law?
Under Article 12 of the UAE VAT Law, A supply is not considered as deemed supply in the following cases:-
a. If no Input Tax was recovered for the related Goods and Services.
b. If the supply is an Exempt Supply.
c. If the recovered Input Tax has been adjusted for the Goods and Services pursuant to the Capital Assets Scheme.
d. If the value of the supply of the Goods, for each Recipient of Goods within a 12-month period, does not exceed the amount specified in the Executive Regulation of this Decree-Law, and the Goods were supplied as samples or commercial gifts.
e. If the total Output Tax due for all the Deemed Supplies per Person for a 12-month period is less than the amount specified in the Executive Regulation of this Decree-Law.