Clarification on Profit Margin Scheme - Eligible Goods

VAT Public Clarification

Profit margin scheme – eligible goods

Issue

It is important that businesses properly identify those goods which qualify to be sold under the profit margin scheme, in the context of transitional periods where ‘second hand’ goods may not have been subject to VAT prior to implementation of VAT in the UAE.

Summary

Only those goods which have previously been subject to VAT before the supply in question may be subject to the profit margin scheme. As a result, stock on hand of used goods which were acquired prior to the effective date of Federal Decree-Law No. (8) on Value Added Tax (“VAT law”), or which have not previously been subject to VAT for other reasons, are not eligible to be sold under the profit margin scheme.
VAT is therefore due on the full selling price of such goods.

Detailed discussion

Goods which qualify to be supplied under the profit margin scheme
Only certain goods are eligible to be supplied under the profit margin scheme. Those goods are listed below, but may only be supplied under the scheme where they were subject to VAT before the supply which shall be subject to the profit margin scheme:

• Second hand goods, meaning tangible moveable property that is suitable for further use as it is or after repair;
• Antiques i.e. goods that are over 50 years old;
• Collectors’ items i.e. stamps, coins, currency and other pieces of scientific, historical or archaeological interest.

PFA the file to know more in details.