Deemed supplies can be goods and services and are subject to VAT UAE.
The VAT Law in Art. 11 considers a supply to be a deemed supply and subject to an output tax charge on its value in the following cases:
- A supply of business assets made for no consideration.
- The transfer of goods forms part of the business assets transferred from/to another MEMBER STATE, except for a temporary transfer or a transfer that is part of another taxable supply of the goods.
- The supply of goods or services that were bought for business purposes and on which input tax was recovered, but they are subsequently used for non-business purposes.
- Business assets held at the date of deregistration.
Excepted Supplies :
No deemed supply arises, and therefore, no output tax has to be accounted for, in the following cases:
- No input tax has been recovered on the goods and services that are being supplied. For example, fuel bought by the business for use by an employee where no input tax was recovered in the first place.
- The supply is an exempt supply. Exempt supplies are not subject to an output
VAT UAE charge in any case.
- Capital assets where VAT has been adjusted to reflect the business’s use. The output charge is applied to the extent of the input VAT claimed.
- Samples or gifts up to the value of AED 500 (excluding VAT) per person in any 12 months, calculated going backwards from the end of the month in which the supply is made (Art. 5(1)(d) of the Regulations). Any gift or sample made for a value above AED 500 is subject to an output tax charge to claw back the input VAT paid on the acquisition of the items.
- All deemed supplies made by a person in any 12-month period are calculated going backwards from the end of the month in which the output VAT on the supplies is less than AED 2,000 (Art. 5(1) (e) of the Regulations). If the output VAT on all deemed supplies is AED 2,000 or more in the 12 months, output tax is due to THE AUTHORITY.
The output charge to be accounted for on the value of the deemed supplies is only applicable if the input VAT in relation to the supplies of goods and services has been deducted. (Art. 12(1) of the VAT Law)
Where input tax has been deducted on goods and services supplied as deemed supplies only partly, the value of the supply to take into consideration for a charge to output VAT is adjusted to reflect the amount of input tax claimed.
An example of deemed supply is where petrol or diesel for motor cars is purchased by a business, VAT is recovered on the acquisition, but then the fuel is used for private purposes; there is a deemed supply and output tax is charged on the supply.
Also, when a car dealer takes a car bought as part of his sale stock and VAT has been recovered on the purchase of the car; but later the dealer assigns it to an employee who uses the car for private purposes, this is treated as a deemed supply under Art. 11(1) of the VAT Law. As the dealer has recovered VAT on the purchase of the car he will have to account for output tax on the value and declare it.
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