Place of supply of goods under VAT in UAE

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Tally Solutions, Feb-05-2020

Place of supply is a very important concept under VAT. Place of supply is the place where the supply is considered to have taken place. The place of supply determines whether tax is applicable on the supply or not. The rules to apply for determining the place of supply are different for supply of goods and services. Also, specific rules have been laid down for determining the place of supply of certain goods and services. In this article, let us understand how to determine the place of supply of goods under VAT.

 

Place of supply of goods under VAT in UAE

The profit margin is the difference between the purchase price of the goods and the selling price of the goods.

Supply of goods can be divided into 3 categories for determining the place of supply:

  • Domestic supplies
  • Exports
  • Imports

 

Place of supply in case of domestic supplies

The place of supply of domestic supplies, i.e. goods which are supplied to a recipient within UAE, will be UAE. Hence, UAE VAT will be applicable on the supply.

Let us take an example to understand this.

Example: Jehan & Co, a registered dealer in Abu Dhabi supplies 100 monitors @ AED 500 to a registered dealer, Noor Electronics, in Dubai.

Here, since the recipient is located in UAE, the place of supply is UAE. Under UAE VAT, this is a taxable supply, attracting levy of 5% VAT. Hence, UAE VAT @ 5% should be levied on the supply.

 

Place of supply in case of exports

The place of supply in case of exports can be divided into 2 categories:

  • Exports outside the GCC
  • Exports to GCC member States

The following table is a summary and a ready reckoner to determine the place of supply in case of exports. We will discuss each of these cases in detail in our upcoming article.

       

Is recipient registered for VAT in GCC member State?

Is the value of exports by the supplier below the mandatory registration threshold in the destination State?

Place of supply

Exports outside GCC

Not applicable

Not applicable

UAE

Exports to GCC Member States

Yes

Not applicable

Destination member State

No

No

UAE

No

Yes

Destination member State

 

Place of supply in case of imports

When goods are imported into UAE from a place outside the UAE, the place of supply will be UAE. Hence, UAE VAT will be applicable on the supply.

Example: Jehan & Co., a registered dealer in Abu Dhabi, purchases 50 mobile phones @ AED 1,500 from Das Pvt Ltd, a firm in India.

Here, Jehan & Co. import goods into UAE from India. The place of supply will be UAE and UAE VAT is applicable on the supply. Jehan & Co. has to pay VAT @ 5% on reverse charge basis on the import. Hence, place of supply is an important factor for determining the tax to be levied on a supply. In our next article, we will learn how to determine the place of supply of services.