In a press release published by the Federal Tax Authority (FTA) recently, they determined the three main categories of ‘eligible goods’. The eligible goods were classified for calculating the VAT – Value Added Tax in the UAE. VAT on the eligible goods will be calculated based on the profit margin scheme.
The classification of edible goods are stated below –
- Second-Hand Goods – Such as tangible moveable property, suitable for future use or upon repair.
- Antiques – Goods that are older than 50 years.
- Collectors’ Items – Such as stamps, coins, currency, scientific pieces, historical or archaeological artifacts, etc.
FTA in the press release also noted that only the goods which had been subject to VAT before the supply may be subject to the profit margin scheme. The FTA also defined the profit margin scheme, they said that it will be considered as the difference between the buying and selling price of the item which includes taxes.
The initial announcement about the eligible goods under the profit margin scheme was made in a “Public Clarification” as per the Federal Decree-Law No. (8) on Value Added Tax.
Reportedly, the FTA informed the registered businesses to carefully verify eligible goods for the profit margin scheme. As a result, stock on hand of used goods that were attained prior to the effective date of Federal Decree-Law No. (8) on the VAT, or goods that have not previously been subject to VAT for other reasons, are not eligible to be sold under the profit margin scheme. VAT is, therefore, due to the full selling price of these goods, the release stated.
The press release further explained that registered businesses may apply the scheme to eligible goods in situations such as:
- If the goods were purchased from either a person who is not registered for VAT or a Taxable Person who calculated VAT on the supply by reference to the profit margin,
- If the taxable person made a supply of goods where input tax was not recovered in accordance with Article 53 of Cabinet Decision No. (52) of 2017.
The press release also said that a taxable person will not be allowed to apply the profit margin scheme in cases where they had issued a tax invoice or any other document mentioning an amount of VAT chargeable. They further mentioned that Taxable Persons must keep inventory and similar documents that clarify the situation of every item bought or sold. Also, purchase invoices with complete details of items bought under the profit margin scheme must be specified.