Think that supply is not actually a supply made by a company. For VAT purposes only, it should be compared with taxable supplies, and therefore VAT should be levied at a rate of 5%. To learn more about what is considered a supply of VAT, please read “What is considered a supply”.
If you look closely at what is considered a supply in VAT, you can supply it without consideration, or use it for non-commercial purposes or transfer. Since these are taxable and different from your regular taxable supplies, it is important for businesses to understand the following:
1. How to determine the value of deemed supplies in VAT
2. How to determine the date/time of the deemed replenishment in the value-added tax
3. How to issue tax invoices for deemed items in value-added tax
Deemed supply value in VAT
The value of goods or services purchased for the manufacture of taxable supplies but actually used for the manufacture of deemed supplies will be equal to the total cost incurred by the taxable person as the supply of goods or services. In other words, the actual purchase cost that is considered to be a supply will be considered to be the value of VAT payable.
For example, Ali Spares Ltd bought 15 computers at a price of Dh30,000/- and paid Dh1,500 in value-added tax. Ali Spares Ltd used an input tax credit of Dh1,500.
Of these 15 computers, 14 are used to maintain corporate records and accounts, and 1 of them is used for personal purposes.
The value of a computer used for non-commercial purposes is the actual cost incurred, which is 2,000 AED. Therefore, Ali Spares Ltd will be responsible for paying 100 dirhams (2,000 * 5/100) value-added tax.
The date or time considered a supply in the VAT
Supply time refers to the time required to pay the export value-added tax deemed to be a supply. The date on which the goods or services are deemed to be provided is the date on which the goods or services are actually provided, disposed of, changed or cancelled.
On February 1, 2018, Ali Spares Ltd purchased 15 computers for Dh30,000/- and paid Dh1,500 in value-added tax. Ali Spares Ltd used an input tax credit of Dh1,500.
Among these 15 computers, one was put into personal use on March 15, 2018.
Here, it is assumed that the supply time is March 15th. Therefore, Ali Spares Ltd. is responsible for paying VAT when submitting the March VAT return.
Tax invoices for value-added tax equivalents
Although the supplies recognized for value-added tax are not the actual supplies produced by the taxable person, you are still required to issue tax invoices or keep sufficient records in the account books to make recognized supplies. Registered companies that provide VAT recognized supplies should issue original tax invoices and deliver them to the recipient of the goods or services (if any). This will apply to deemed supplies, such as free supply of commercial assets, free samples, gifts, etc.
If there is no actual consignee of goods or services, records need to be kept in case it is deemed a supply. Usually, it is sufficient to record here the book records that are considered supplies and the VAT liability for such supplies. This will apply to the supply of commercial assets deemed to be used for non-commercial purposes.
1. What is deemed supply under UAE VAT?
2. Supply exception under UAE VAT regulations