The Value Added Tax in UAE and other GCC countries is going to affect businesses and people significantly. It is hence important for an enterprise to know what are its implications and how is it going to affect their business. One such parameter of the VAT is ‘Supply,’ a specific term that signifies something very important in import and export of goods.
What Does It Mean By Supply Under VAT? What Are Its Different Dimensions? We’ll try to explain that in this article.
Let us take a look at the definition of ‘Supply’ here and what does it mean for the various business entities that fall under VAT.
What Is A Supply Under VAT?
Supply means the goods that are involved in a business transaction. A transaction is said to have a supply when two parties are involved in transactions of goods, and one of the parties is a taxpayer. For example, the selling, buying and transfer of stocks are considered as a supply even though there is no direct monetary transaction involved.
Another way of looking at the term ‘supply’ here is the transaction of goods, and services between two entities in the UAE, where the goods and services can potentially advance one of the transacting parties. This entails, purchasing goods for resale, exports and imports or outsourcing of a service.
Components Of Supply Under UAE Value Added Tax
Supplies under VAT fall under three characteristics that are used for calculating the tax based on the transaction, namely, time, place and value. Let us take a look at each one of them in detail.
Date Of Supply
What does ‘Date Of Supply’ mean for VAT?
It is the date when the tax is applied to the goods and services involved in the transaction.
When do they levy the VAT On Goods?
If the said goods in question were transported from one place to another, the supply date would be the date when the goods are removed from their stock. On the other hand, if they were not transported, the supply date is the date when the trader began making it available for public consumption. However, if the supply involves assembling or installing the goods, the supply date is the one when the installation and assembly were finished.
When is VAT on output applied on a service?
The basic taxable date for a service is the date when the services are carried out and provided to the customers.
However, the tax will be levied on the services in the following ways:
- Date when items were supplied.
- The date when VAT invoice is issued.
- The date when the payment for those goods was received, either fully or partially.
If there is a continuous supply of goods and services, the taxes will be applied in the following ways:
- The date on which the payment is listed on the invoice.
- The actual date when payment is made.
- At least one time in a span of 12 months consecutively.
Place Of Supply:
What does ‘place’ mean for supply in VAT?
It is the place where the VAT taxable transaction takes place between various goods. It is different for different goods.
While for the supply of goods, it is the place where supply occurs, for services it is where the supplier of the services is based.
Place Of Supply Of Goods
Domestic supplies: When the goods are supplied within the borders of UAE.
Exports outside GCC: It is when the goods are supplied to a place outside the GCC.
Supplies Within GCC: When the good is supplied to another GCC country, it also depends if the receiving person is VAT taxable.
If he is a taxable person, then the place of supply will be considered.
If he is not VAT registered, place depends upon the following conditions:
|Below The Threshold||Above The Threshold|
|Amount of supply is below the compulsory threshold.||The total amount is below the compulsory threshold in the state where it was supplied.|
|If it is UAE, the UAE VAT has to be paid.||VAT of the destination GCC member state.|
Importing Goods In The UAE.
The place deemed as supply for VAT is where the goods are to be consumed within the UAE.
Importing goods in the Emirates for exporting them to other GCC economies.
If the goods are imported into the UAE, it is the place of tax, however, if they are imported to another GCC country, here are some special conditions:
(i) The importer should pay the import VAT amount without charging reverse charge
(ii) The VAT on import can be covered only in a GCC state where goods were transferred.
Goods imported in UAE and later transferred to another GCC state
If an importer imports good and gets the VAT amount recovered, thinking that it will stay in the UAE, however, he has to transfer it to another GCC country later, VAT will be levied.
Place Of Supply Of Services
What places can be considered as places of supply?
The place of supply is considered as the place where the supplier resides.
Exceptions to basic rule
- Domestic supplies
If the recipient is located in another GCC nation, then that is considered as the place of supply.
- Imports from outside GCC
If a non-UAE supplier provides to a UAE based person who is registered for VAT, the place will be UAE.
Anywhere the service provider makes the installation, will be considered as the place of supply.
- Real estate related services
- Restaurants and hotels
- Cultural activities services
- Electronics and tele-communications related services
Value Of Supply
What does the value of supply mean for VAT?
The value is the price that the supplier provides for providing certain products and services. It entails prices that are involved in the product such as transport, packaging, etc. that are levied on the buyers. In easier words, it is the value that is charged to the buyer excluding VAT.
Consideration – VAT = Value
Consideration can be monetary based or otherwise or even a mix of the two.
- If consideration is monetary based, the supplied value will be without tax. This will includes expenses incurred by the supplier.
- If the consideration or a part of it is non-monetary, the value will be calculated on the monetary part as added with that the market value of non-monetary part and excluding tax.
How does value of the supply decreases?
- Discounts offered to the client.
- Subsidies are given by GCC members to the supplier.
Types Of Supply Under The UAE VAT
Following are the types of supplies under the latest Value Added Tax
1) Standard Rated Supplies:
The standard rate that will be levied on a variety of services and goods will amount to 5%.
2) Zero-Rated Supplies:
These supplies will be levied 0% tax. In the invoice, the supplier is required to show a tabular column that mentions zero tax and zero value so that the price of the product is not used for claiming tax values.
However, if one purchases an item where the taxes for it have already been paid and the item is sold afterward, you can claim tax credits on it.
3) Supplies With VAT Exempted:
These are the products and services that have been excluded from the VAT list. They include basics and essentials such as public transport, health services, education and others.
4) Out-of-scope supplies:
If a supplier from overseas or a business entity not registered for VAT provides a good or services to someone who does not operate in the UAE, it is beyond the scope of the VAT.
Two types of out-of-scope supplies:
(i) When one acquires goods from outside the UAE and supplies them to someone outside the UAE without bringing them in the country.
(ii) If an entity/person registered with VAT provides a service/goods to someone in another GCC economy registered with VAT, the trade is considered as out of scope for VAT.
5) Deemed supplies
When a businessman buys goods for business purposes, claims VAT credit on it and then uses the goods for a non-business purpose, they are deemed supplies.
6) Composite supplies
When two or more goods that cannot be sold independently are sold together as they are required to be sold, they are clubbed together as a composite supply.
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