Value Added vat is imposed on the supply of goods and services for consideration during the course of business by any person within the country, provided that the supply is not exempt from tax.
Supply, its types and conditions were specified in Title Three of Federal Decree-Law No. 8 of 2017 regarding Value Added Tax, as amended by Federal Decree-Law No. 18 of 2022
It was dealt with in detail in Part Two of the Executive Regulations of the Federal Decree-Law (Cabinet Resolution No. 52/2017, 45/2020, 24/2021, 88/2021 and 99/2022)
For a supply to be subject to VAT, it must meet the conditions and specifications that were specified in the definition of a taxable supply contained in the first Title of the aforementioned decree and regulation. Therefore, we will be exposed to these conditions as follows:
The first condition: that the goods or services are supplied for consideration.
Goods, as defined in Part One of the Decree and Regulations, are Physical property that can be supplied, including real estate, whether for sale or rental, water and all forms of energy, including electricity and gas, including biogas, coal gas, liquefied petroleum gas, natural gas, oil gas, produced gas, and refinery gas, reformed natural gas, tempered liquefied petroleum gas, and any mixture of gases, whether used for lighting, heating, cooling, air conditioning, or any other purposes.
The supply of goods is by transferring their ownership or transferring the right to dispose of them as an owner from the person to another, whether by virtue of a written or verbal sale agreement. The transfer of ownership may be immediate or in the future.
Services were defined in the decree and the regulation as anything that can be supplied other than goods, and the supply of services includes any of the following:
- The granting, assignment, cessation, or surrender of a right.
- The making available of a facility or advantage.
- Not participating in any activity or not to allow its occurrence or agree to perform any activity.
- The transfer of an indivisible share in a Good
- Transfer or license intangible rights, such as the rights of authors, inventors, and artists, rights, trademarks, and rights which the legislation of the State deems to be within such category.
- The functions of member of a board of directors, performed by a natural person appointed as such, for any government entity or private sector establishment, shall not be considered a supply of Services.
The supply of goods and services must be for consideration, the consideration as defined in the decree and the regulations is All that is received or expected to be received for the supply of Goods or Services, whether in money or other acceptable forms of payment.
That is, it can be in a consideration for supply in cash or in kind.
The benefit of distinguishing between goods and services lies in the possibility of determining the place of supply, as they differ in whether the supply is a supply of goods or a supply of services.
– The situation is also different when recovering the tax on expenses that took place before registration, as Article 56 of the decree specified five years prior to registration, the expense of which tax can be recovered for services, and no period was specified regarding the recovery of tax paid on goods before registration.
The second condition: that the supply of goods and services is made by a taxable person.
The person subject to tax according to the first article of the decree is the person registered for VAT purposes or obligated to register, and There is no difference between the registered according to the mandatory or voluntary limit, and the person is obligated to register when he exceeds the mandatory registration limit.
The third condition: that the supply takes place in the United Arab Emirates.
Where the supply must take place within the country in accordance with the provisions of the law, and there are many rules for determining the place of supply, which were mentioned in Articles No. 27, 28, 29, 30, and 31 of the Decree and in Articles No. 20, 21, and 22 of the Regulation.
Fourth condition: Goods and services must be supplied during the course of Business.
A business is any activity conducted regularly, on an ongoing basis and independently by any Person, in any location, such as industrial, commercial, agricultural, professional, vocational, service or excavation activities or anything related to the use of tangible or intangible properties.
The condition of regularity and continuity of activity does not make a one-time sale transaction a supply made during the course of business.
Fifth condition: the supply is not exempt or outside the scope of the tax.
The type of supply must be determined for the tax liability to be known, whether by imposing the tax or refunding it, as the tax may not be imposed on exempt supplies or supplies outside the scope of the tax, and the tax may not be recovered for expenses used in exempt supplies, and where exempt supplies were specified exclusively in the law,
Any a supply that does not meet all the conditions is considered a supply outside the scope of VAT and VAT may not be imposed on this supply.
