Exemption from deemed supplies under VAT in the UAE refers to cases that prevent a case from being considered as a deemed supply. This means that even if an instance is listed as a fictitious supply, if it is listed in the fictitious supply exception, that instance will not be considered a fictitious supply and no VAT will be charged.
For the case of acceptance of delivery in the UAE, read What is acceptance of delivery?
The following are exceptions to acceptance of delivery.
1. Input tax on such goods or services will not be refunded.
If no input tax credit is claimed for the goods or services, there is no deemed supply case and no VAT is payable. This is even more true when business assets are provided free of charge and used for non-business purposes. In such cases, if the input VAT is not refunded, it will not be considered deemed supply, even if it is provided free of charge or used for non-business purposes.
Ali Spares Ltd purchased 15 computers worth AED 30,000 and paid his VAT of AED 1,500. Of these 15 computers, 14 were used to maintain company records and accounts and one was used for personal purposes.
Ali Spares Ltd claims deduction for only 14 computers used for business purposes.
Computers used for non-business purposes do not have input VAT refunded and therefore are not considered supplies received and no VAT is charged.
2. Goods and services are eligible for tax exemption.
If the goods and services covered by the notional supplies actually form part of his VAT exemption, these supplies are not considered to be notional supplies. In other words, once a supply is exempt, it always remains tax-free and even if applied in the case of a notional supply, it is not considered a taxable supply. For example, the supply of residential buildings.
3. Adjustment of input tax credit based on capital investment regulation
The scope of input tax credit for capital investment is determined based on capital investment regulation. In the case of such goods and services (deemed supplies) where the input VAT refunded has already been reversed, this is not considered to be a deemed supply under the capital asset regime.
4. Samples, gifts, etc.
Fictitious deliveries include deliveries without consideration, but there are threshold exceptions that are intended to prevent lower value transactions from being considered fictitious deliveries. The threshold here is Dh500 and the following conditions apply to this exception:
The value of the delivery of the goods to each recipient does not exceed Dh500.
AED 500 threshold calculated within 12 months.
Deliverables will be used as samples or promotional gifts.
For example, if a product is delivered to a customer as a sample, its value is AED 450 over a period of 12 months.
You can also register for VAT Registration on our website: