Place of Supply of Specific Goods under VAT in UAE

Place of supply of specific goods


In our article 'Place of supply of goods under VAT in UAE', we have discussed the major scenarios of supply of goods and the place of supply in each of these scenarios, i.e.

  • a.Domestic supplies
  • b.Exports
  • c.Imports

In this article, let us see the place of supply of specific goods.

1.Place of Supply of installed or assembled goods

When goods supplied require installation or assembly, the place of supply of the installed or assembled goods will be the place where the goods are installed or assembled

This means that if the place where the goods are assembled or installed is outside UAE, the place of supply will be outside UAE. It will be treated as an export.

Similarly, if the place where the goods are assembled or installed is in UAE, the place of supply will be UAE. It will be treated as a domestic supply.

Example: Noor Lifts, registered under VAT in Dubai, supplies lifts which are installed at the required location. Noor Lifts supplies a lift to Rex Cars which is installed at their branch in Abu Dhabi.

Here, the place of supply will be UAE, as the lift is installed in UAE. Hence, VAT @ 5% will be applicable on the supply.

Let us take another example.

Example: Noor Lifts, registered under VAT in Dubai, supplies a lift to Azra Electronics in Saudi Arabia. The lift is to be installed at Azra Electronics’ premises in Saudi Arabia.

Here, the place of supply is Saudi Arabia, as the lift is installed in Saudi Arabia. Hence, it will be treated as an export and will be a zero rated supply>.

(Note that here, the place of supply rules for assembled or installed goods overrides the default rule for determining the place of supply of exports. As it is a supply to an unregistered person in a GCC VAT implementing State, the default rule for place of supply in case of supply to an unregistered person in a GCC VAT implementing State requires that the total value of exports by the supplier to the recipient’s State needs to be checked. If the value of exports does not exceed the mandatory registration threshold in the State, i.e. Saudi Arabia, then the place of supply will be UAE and the supplier has to charge VAT @ 5% on the supply.).

Hence, in the case of supply of installed or assembled goods, the specific rule for determining the place of supply of assembled or installed goods needs to be applied, i.e. the place of supply in this case will be the place where the lift is installed, i.e. Saudi Arabia and it will be a zero rated supply.

2.Place of Supply of water and energy

The place of supply of water and energy through a distribution system depends upon whether the recipient is a taxable person having a place of residence in a GCC VAT implementing State.

  • 1.If the recipient is a taxable person having a place of residence in a GCC VAT implementing State, the place of supply of water and energy will be the place of residence of the recipient.
  • 2.If the recipient is not a taxable person, the place of supply of water and energy will be the place where the actual consumption takes place.

Example: Alia Water Supply LLC, a registered dealer in UAE, supplies water through a piped distribution system to Azra Electronics, a registered electronics dealer, in Saudi Arabia.

Here, Azra Electronics is a registered dealer having a place of residence in Saudi Arabia, a GCC VAT implementing State. Hence, the place of supply will be the place of residence of the recipient, i.e. Saudi Arabia. It is an export and will be a zero rated supply.

Let us take another example.

Example: Alia Water Supply LLC, a registered dealer in UAE, supplies water through a distribution system to a consumer, Mr. Rakesh, in UAE.

Here, as the recipient, Mr. Rakesh, is not a taxable person, the place of supply of water is UAE. VAT @ 5% will be applicable on the supply.

Summary

Supply Type of recipient Place of supply
Supply of installed or assembled goods Not applicable Place where the goods are installed or assembled
Supply of water and energy Taxable person having place of residence in a GCC VAT implementing State Place of residence of the recipient
  Non-taxable person Place where actual consumption takes place

Hence, the supply of installed or assembled goods and supply of water or energy through a distribution system are special cases where the place of supply is to be determined as per the specific rules. The default rules of place of supply of goods do not apply in these cases.

Related Articles:-

1.Place of supply of goods under VAT in UAE



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