Assets provided on FOC against Branding
In case of an agreement where one party provides its assets on FOC basis for 12 month to an other party but due to legal compliances of related Emirates, assets required to be registered for second party name and mortgage remains with first party. Second party will do branding, display logo, banner advertising etc at its places for first party.( The second party has such business of same kind already and against such services, will charge an agreed amount including VAT which is claimable by first party). The benefits for the firstly party is future economic flows due to such activity due to association with second party.
Upon expiry of agreed period, assets will return to first party. Second party will bear all operating cost. What will be the VAT treatment i.e. Deemed supplies, Sponsorship over the period, VAT need to pay by the first party at time of trasferring of its assets and will reverse VAT as when assets returned and finally VAT will be charged at residual value as when ownerships will be transferred to any other customer. The decrease in value of during 12 months, cost will be borne by the first party.
It does not appear that the first party is making any supply. From what I understand the second is providing branding services for benefit of first party and charging for the same. So there is question on whether first party is actually making any supply since second party does not appear to derive any benefits or utilise the item for their own purposes. Transaction is complicated and would require assessment of actual scenario.0 Like
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