The VAT legislation in UAE has defined taxable supplies as â€œsupply of goods or services for a consideration by a person conducting business in the UAE, and does not include exempt supplyâ€. Thus taxable supplies will be either subjected to the standard rate or zero rates of VAT. If it is an exempt supply then the supply cannot be a taxable supply. The following conditions have to be met in order to make a taxable supply:
A supply of â€œgoods and servicesâ€
The first step towards understanding a taxable supply is that it is necessary to establish whether a person is supplying goods or services. Depending on the date of supply or the place of supply rules, the VAT rules may apply differently on goods and services, thus the determination of whether the supply of goods or services is made is very important.
If there is a transfer or granting of the right to use the property or assets as the owner, or transfer of the ownership of any property or assets it is considered as the supply of goods. Under the legislation, the supply of water, energy or real estate is considered as a supply of goods.
The supply of anything other than a supply of goods is a supply of services.
Supply has to be for â€œconsiderationâ€
Anything that is received or expected to be received for the supply of goods or services, whether in money or other forms of payment is said to be included in â€œconsiderationâ€. Supplies must be made in return for consideration only then a taxable supply exists.
The supplier should not only consider the financial benefits received, but must also consider any goods and services that are being received in exchange.
Supply has to be by a person conducting business in the UAE
In order that the supply has to be a taxable one, the supply has to be made by the person who is conducting business in the UAE.
Business is considered to be very broad and itâ€™s a regular ongoing activity conducted independently by a person. Thus the activities of the employees will not be treated as being in the course of the business. But the activities of independent contractors can give rise to the requirement to charge VAT.
If you have any doubt on taxable supplies, call us 04 443 1604