VAT Treatment of Sale or Disposal of Motor Vehicles Held as a Business Asset in the UAE
Most of the businesses in the UAE purchase, rent or lease motor vehicles to be used for business purposes. Such motor vehicles are considered as part of the company’s assets. However, companies need to consider the VAT implications when they try to sell or dispose of motor vehicles that are business assets. VAT was introduced on 1st January 2018 and what could be the VAT implications on vehicles purchased on or before that date? And what will be the VAT implications of vehicles purchased on or after 1st January 2018? VAT consultants in Dubai can come in handy for you to find solutions for such questions.
Alternatively, this article serves as a guide for you to find answers to this question. Read ahead.
What Does The VAT Legislation Say?
Article 53 of the VAT Executive Regulation that deals with the Non-recoverable input tax cases states that Input Tax is not recoverable if a motor vehicle was purchased, rented or leased for use in the Business and is available for personal use by any person. The term Motor Vehicle in this context is defined as a road vehicle designed or modified to facilitate the conveyance of up to ten people including the driver. A motor vehicle in this context can’t be a truck, forklift, hoist, or any other similar vehicle.
Furthermore, a motor vehicle can’t be considered as being available for private use if falls under any of the following categories:
A Taxi Licensed By The Transporting Authority Such As The RTA To ply Within The UAE
A motor vehicle registered in the UAE to be used as an emergency vehicle such as police, fire, ambulance or any other similar emergency services
A Motor Vehicle Used In a Rental Business to be Rented to Customers
This means input tax is not available on motor vehicles except that see listen here such as truck, forklift, hoist, emergency vehicles, vehicles used by rental services for renting to customers and vehicles used as taxis. VAT consultants in Dubai can shed more light on this.
VAT Treatment on Further Sale of Motor Vehicle Used as a Business Asset
Article 29 of the Executive regulation allows taxable entities to compute VAT on any supply of Goods as per the profit margin scheme. The profit margin scheme is calculated as the difference between the purchase price of the Goods and the selling price of the Goods.
You have to meet the following conditions for the profit margin scheme:
a) Supply of Goods is made and Input Tax was not recovered on the supply as per Article 53 of the executive regulation
b) You purchased the goods were purchased from a person who is not registered for UAE VA
c) You purchased the from a person who calculated VAT on the supply using the profit margin scheme.
a) Goods were subjected to VAT before the supply
b) Goods are tangible moveable property ideal that can be used in their present condition or after repair
If the person doesn’t qualify for the Profit Margin Scheme, you can charge VAT on the full sale amount. Where a Taxable Person has charged Tax in respect of a supply concerning the profit margin, the Taxable Person shall issue a Tax Invoice that clearly states that the Tax was charged concerning the profit margin, in addition to all other information required to be stated in a Tax Invoice except the amount of Tax.
Evidence that good was subject to tax previously as mentioned in Condition B
For a profit margin scheme, goods should have been subjected to tax before the supply. It must include the following details:
- Date in which the goods were first manufactured
- Proof that supplier made the payment on the original purchase
How Can Jitendra Chartered Accountants Help?
Dealing with VAT rates will be stressful for companies to understand the VAT implication on the sake or disposal of motor vehicles held as a business asset. Therefore, the businesses require the services of the best VAT consultants in Dubai, such as Jitendra Chartered Accountants (JCA). JCA’s registered tax agents in Dubai, UAE, can assist the businesses to account for VAT. JCA ensures the entities comply with requirements such as VAT return filing, record keeping, financial reporting, and VAT refund. We have a team of highly qualified accountants and VAT consultants who will make compliance easier for taxable entities. Our tax agents in the UAE are registered with and approved by the Federal Tax Authority, which makes our services reliable.