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VAT corner: What is the nature of the delivery? – News

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Taxpayers can establish that anything that is not a supply of goods will be considered a supply of services.

Dubai – In our previous articles we have discussed in detail the supplies and the different categories of supplies; in this article, we will discuss the nature of retail sourcing.



By Mahar Afzal

Posted: Sun Jan 2, 2022, 6:34 PM

Nature of the supplies

Article 1 (20) of the GCC VAT framework (“the framework”) states that “any form of supply of goods or services for consideration” is called supply. From this definition, taxpayers can infer that the supply by nature can be classified as (i) a supply of goods or (ii) a supply of services. It is very important to establish whether a registered taxpayer provides goods or services, as different rules apply to identify the tax point, establish the place of supply, adopt an appropriate tax position and apply the correct rates.

Supply of goods

Section 5 of the UAE VAT Act (“the Act”) states that: “The following are considered a supply of goods:

1. Transfer of ownership of the Goods or the right to use them to another Person according to what is specified in the Executive Regulations of this Decree-Law.

2. The conclusion of a contract between two parties resulting in the transfer of goods at a later date, in accordance with the conditions specified in the implementing regulations of this decree-law ”.

Article 2 of the VAT Executive Regulations (hereinafter the “Regulations”) stipulate that:

1. “A transfer of ownership of Goods or the right to use them from one Person to another Person includes, for example:

a. A transfer of ownership of the Goods under a written or verbal agreement for any sale;

b. A transfer of ownership for a Counterparty on a mandatory basis in accordance with applicable laws.

2. For the purposes of clause (1) of this article, a transfer of the right to use assets shall not be treated as a supply of goods unless the other person is able to dispose of them as a owner.

3. The conclusion of a contract between two parties resulting in the transfer of Goods at a later date will be considered as a supply of Goods when the agreement mentions a transfer or intention to transfer ownership of the Goods or a future transfer of ownership. goods.

4. The following will be considered as a supply of Goods:

a. A reserve of water.

b. An offer of real estate including sales and rental contracts.

vs. A supply of all forms of energy, which includes electricity and gas, including biogas, coal gas, liquefied petroleum gas, natural gas, petroleum gas, production gas, fuel Refinery gas, reformed natural gas and tempered liquefied petroleum gas, and any gas mixture, whether used for lighting, or heating, or cooling, or air conditioning or for any other purpose ”.

In light of the above wording of the law and regulations, we can establish that when the ownership of the goods is transferred or the right of use is given with the right to dispose of the goods, under the agreement ( written or verbal) or in a compulsory manner as required by law, will be considered as a supply of goods. Even the ownership of the goods is transferred in the future by virtue of the contract which mentions the transfer, the intention to transfer or the future transfer, nevertheless, it will be considered as a delivery of the goods.

The word contract has not been defined in the framework, law and regulations, companies can conclude that it is its formal agreement which is binding on both / all related parties and legally enforceable by law. Usually contracts are in written form, but the regulations have specifically pointed out that a verbal agreement that binds all related parties will also fall under the definition of contract. The supply of goods under the contract includes sales of goods whose ownership is transferred, the delivery of goods under the hire purchase agreement, etc.

The supply of goods can take the obligatory form such as the seizure of goods by legal authorization, the closing of stock at the time of the liquidation of the company, the use of goods for non-professional or private purposes, the goods retained by the taxpayer after delisting etc.

Under the specific rules set out above in Article 2 (4) of the Regulation, the supply of water, the supply of immovable property and the supply of all forms of energy are also referred to as the supply of goods. Thus, where water is supplied or real property is supplied by way of sale or rental, this will fall under the definition of supply of goods. Energy such as electricity and any form of gas, whether used for lighting, heating, cooling, air conditioning or any other purpose, will fall under the supply of goods.

Provision of services

Article 6 of the law states that “A supply of services is any supply which is not considered to be a supply of goods”. Thus, taxpayers can establish that anything that is not a supply of goods will be considered a supply of services. Section 3 of the Regulation specifically states that the provision of services includes (i) the granting, assignment, termination or surrender of a right, (ii) the making available of a facility or advantage, (iii) not to participate in any activity, or not to allow its occurrence, or to accept to exercise any activity, (iv) The transfer of an indivisible part of a good; and (v) The transfer or licensing of intangible rights, for example the rights of authors, inventors, artists and trademark rights, and rights which the law of the State considers to be belonging to this category.

Mahar Afzal is a Managing Partner at Kress Cooper Management Consultants. The above is not an official opinion, but a personal opinion of the writer. For any questions / clarifications, please write to [email protected]