The Profit Margin Scheme – Eligible Goods and Conditions
The Profit Margin Scheme offers Taxable Persons the flexibility to calculate tax based on the profit margin generated from the sale of goods rather than the sale value. To apply VAT under the profit margin scheme, specific conditions outlined in UAE VAT law must be met.
For a detailed understanding of these conditions and the VAT calculation process, please refer to our article titled “Profit Margin Scheme under VAT in the UAE and How to Calculate VAT under Profit Margin Scheme.”
In this article, we will explore the types of goods that qualify for the profit margin scheme and the treatment of goods purchased before the introduction of VAT.
Eligible Goods under the Profit Margin Scheme
Only designated goods can be sold under the profit margin scheme. The following categories of goods are considered eligible under the profit margin scheme:
1. Second-hand goods, referring to tangible movable property suitable for further use as is or after repair.
2. Antiques, encompassing goods over 50 years old.
3. Collectors’ items, including stamps, coins, currency, and other items of scientific, historical, or archaeological significance.
These goods can be supplied under the profit margin scheme only if they were subject to VAT before the sale. In simpler terms, these goods must have incurred VAT before they can be sold under the Profit Margin Scheme.
Now, you might be curious about the status of these designated goods if they were purchased before January 1, 2018, when VAT was not yet implemented. Let’s take a closer look at the treatment of goods purchased before the introduction of VAT within the Profit Margin Scheme
As previously discussed, eligible goods for sale under the profit margin scheme are those that were previously subject to VAT. Consequently, designated goods that could qualify for sale under the profit margin scheme but were purchased before VAT implementation are not eligible for the scheme.
In simple terms, designated goods bought before January 1, 2018, are not eligible for sale under the profit margin scheme. When such goods are sold, VAT is applicable to the entire selling price.
Establishing Prior VAT Application on Goods
To apply the profit margin scheme, suppliers must have evidence that the goods were previously subject to VAT. The following instances can serve as evidence that goods were previously subject to VAT:
1. Information pertaining to the date when the goods were first manufactured, sold, or put into use. For example, in the case of a car, the date of its first registration would indicate that its sale would have been subject to VAT if registered after January 1, 2018.
2. Proof that the supplier paid VAT on their initial purchase. For example, suppliers may provide a copy of the tax invoice related to their purchase of the goods.
You can also register VAT Registration in our website: