ELIGIBLE GOODS FOR PROFIT MARGIN SCHEME

INTRODUCTION

The Federal Tax Authority had issued a VAT Public Clarification VATP002 which specify the details of the goods eligible for applicability of profit margin scheme. This was issued to help the business so that they could properly identify those goods which could be sold under the profit margin scheme in context of the transitional periods in which the second hand goods were not subject to VAT prior its implementation in UAE. Whereas the Federal Tax Authority made an announcement determining the categories of eligible goods for calculating VAT on the basis of profit margin scheme which were , second hand goods , antiques and collector’s items as per the Federal Decree Law No. 8 on VAT .

Further the FTA also noted that profit margin scheme would apply to those goods which had been subject to VAT before the supply in question .

ADDITIONS MADE BY THE FTA

The FTA further asked the registered business to carefully verify the eligible goods for profit margin scheme. It also stated that VAT is due on the full selling price of the stock in hand of used goods that have been acquired either prior to implementation of VAT or which are not eligible to be sold under the profit margin scheme .

FURTHER ELIGIBILITY TO THE PROFIT MARGIN SCHEME

This scheme would be applicable if goods are purchased either from a person who is not registered for VAT or a taxable person who has calculated VAT on the supply by reference to the profit margin.

CASES WHERE PROFIT MARGIN SCHEME IS NOT APPLICABLE

The taxable person’s are required to keep inventory or similar documents that clarify the status of every item which is bought or sold as well as purchase invoices that outline the details of items bought or sold as well as purchase invoice that outline the detail of the items that are bought under the profit margin scheme. Thus where the taxable person has issued a tax invoice or document mentioning a chargeable amount of VAT.

REQUIREMENTS FOR PROFIT MARGIN SCHEME

In case of applying the profit margin scheme, the business are required to issue a tax invoice which states that the business has imposed tax on a certain supply using the profit margin scheme along with all the other information that is required in an invoice.

CONCLUSION

The FTA has however published a series of guides that cover all legislative and executive aspects of the UAE tax system. This has been done in order to empower the business and general public to educate them about their rights and obligations and the UAE tax system.