It applies to certain goods and has specific conditions to be met in order to supply goods under this scheme. This article explains the Profit Margin Scheme.

What is the Profit Margin Scheme?

The Profit Margin Scheme allows a Taxable Person to calculate Tax invoice on the profit margin made on a supply, instead of the full sale value.

Does the Profit Margin Scheme apply to goods and services?

The Profit Margin Scheme only applies to the supply of certain specified goods, not services.

What goods can be supplied under the Profit Margin Scheme for VAT Registration UAE?

The following goods can be supplied under the Profit Margin Scheme:

Pre-owned goods that are suitable for further use as is or after repair

Antiques over 50 years old

Collectors’ items like stamps, coins, and currency

Why is this Scheme available?

The goods eligible for the Profit Margin Scheme are typically pre-owned goods on which VAT dubai was already charged at first supply. When registered second-hand goods dealers purchase these from unregistered consumers, VAT is not charged so the dealer cannot recover input tax. Hence, charging VAT on the full sale value would lead to double taxation. The Profit Margin Scheme allows paying VAT Registration only on the profit made on the supply.

What if the goods are bought from a registered VAT person?

Sometimes registered second-hand goods dealers may purchase used goods from registered persons. Here, the supplier charges VAT dubai. If the dealer uses the margin scheme for supplying these goods, they cannot recover this input tax. If not using the margin scheme, the dealer can recover the input tax invoice format  paid.

What are the conditions to supply goods under the Profit Margin Scheme?

Goods supplied under the Profit Margin Scheme must fulfill either of these:

Purchased from either:

A non-registered VAT dubai person

A Taxable Person who supplied the goods under the Scheme

OR

Input tax is not recovered on purchasing the goods

In short, input tax should not be recovered on goods supplied under the Scheme.

Is notification to the FTA required for supplies under the Profit Margin Scheme?

No, persons supplying goods under the Scheme don’t have to notify the FTA. For eligible transactions, VAT can be charged accordingly and reported in regular VAT returns.

In the next article, we’ll learn how VAT Registration is calculated under the Profit Margin Scheme and compare it to normal VAT calculation.

You can also Register for VAT Registration on our website: 

Home