Saturday, 20 January 2018 08:54 GMT
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UAE- Will VAT apply on buying or selling used personal goods?

(MENAFN - Khaleej Times) Many UAE residents used to buy and sell personal goods throughout the whole year in a tax-free environment until last year. But after the introduction of value added tax (VAT) from January 1, the question now arises if whether these transactions will also be subject to VAT.

According to a tax expert, VAT will not be levied on a transaction involving individuals when buying and selling goods if it is a one-off economic activity.

For example, an individual selling a car to another person or an individual selling a painting at an exhibition will not be subject to five per cent VAT even though it is an economic activity. But if it becomes a regular economic activity and the individual starts these on a regular basis, then that person will have to register with the Federal Tax Authority to obtain a tax registration number.

When it is one-off transaction and not a regular economic activity, then there is no VAT on it. Because the law clearly says that if it's not an economic activity, even though it is a supply of goods, it will not be subject to VAT. This rule can apply to property and moveable assets - anything which is not an economic activity.

"For example, someone does a painting as an art and sells it in an exhibition as a one-off activity, it will not be subject to VAT - even if he gets a good price at an auction. But if he starts auctioning daily, fortnightly or on monthly basis, then it becomes an economic activity, and he will have to charge VAT," says Mayank Sawhney, director at MaxGrowth Consulting.

Citing an example, Sawhney said that if an individual sells 15 cars a year, then it would be considered as his of her economic activity and the FTA would have the jurisdiction over him to bring that individual under the tax net.

"Anything that is a personal moveable asset or individual selling not as part of an economic activity, will not have VAT on it. But if an individual starts selling a car every 15 days, then it will become an economic activity; he will have to register for a TRN and start charging VAT," Sawhney added.

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