Dubai: The Federal Decree-Law No. 8 of 2017 for value added tax or the Vat law issued on Sunday is all encompassing legal framework for the implementation and administration of Vat in the UAE that covers supply or deemed supply of goods within the UAE.
According to the Decree-Law, a supply of goods includes the transfer of ownership of the goods or the right to use them as an owner from one person to another and an entry into a contract between two parties triggering the transfer of goods at a later time.
The Decree-Law made two exceptions as to what constitutes a supply: the issuance or sale of any voucher unless the received Consideration exceeds its declared monetary value; and the transfer of whole or an independent part of a Business from a Person to a Taxable Person for the purposes of continuing such Business that was transferred.
Government entities too are subject to Vat as suppliers in cases where their activities are outside their sovereign capacity or if its activities are in competition with the private sector.
The Cabinet – upon the suggestion of the Minister – issues a decision determining specific Government entities whose activities are considered as “activities in sovereign capacity” and instances where these activities are considered not in competition with the private sector.
Transfer of assets are taxable and are considered deemed supply, according to the new law. A supply is considered ‘deemed’ if the supply of goods or services was all or part of a taxable person’s assets, but no longer considered to be as such. Similarly, the supply is Deemed if implemented through a transfer by a Taxable Person of Goods forming part of his business assets from the UAE to another VAT-implementing GCC state, or from the Taxable Person’s business in a VAT implementing GCC state to his business in the implementing state, unless, in either case, that transfer: is treated as temporary under the Customs Legislation; or is made as part of another Taxable Supply of these Goods.
The same applies to the supply of goods or services for which input tax may be recovered but was used, in part or whole, for purposes other than Business, but only to the extent of non-Business use, as well as for Goods in the ownership of the Taxable Person as at the date of Tax Deregistration.