VAT treatment for trade-in product
Dear friends, I would like to understand VAT treatment in a scenario wherein the customers are offered to exchange their old products for the brand-new product. In this case, customers are required to pay only the variable consideration resulting in a discount on the price of the new product. So, the old product returned by the customers to the retailer is adjusted in the price of the new product - is the consideration by the retailer for this old product liable to Vat as a part of the total selling price of the new product. Any views will be helpful. Thank you
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Exchange of old product for new is alternative form a payment instead of cash settlement. The definition of consideration includes all forms of acceptable payment and Article 34 ER specifies where there is a non-monetary payment involved (eg: exchange of goods/barter) then value of such non-monetary part should be included as consideration for VAT purposes. In the given case VAT is due on full value of the new product being sold to the customer. Eg: if value of new product is AED 1000, the customer exchanges old product which is valued at AED 500 and makes balance AED 500 in cash payment, VAT is still due on the entire AED 1000.
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