VAT on Transfer of Business as a Going Concern
When businesses transfer ownership in Dubai, both parties need to know about VAT implications. Every business owner wants to make sure their transactions follow UAE VAT law. Mubarak Al Ketbi (MAK) Auditing always supports clients with these important steps.
Is VAT Charged for Transfer of Business as a Going Concern?
VAT law in the UAE says that if you transfer a business as a going concern, it’s not a supply of goods or services. This means you won’t pay VAT on this type of transfer. Both the seller and buyer must check the deal meets all VAT law conditions. If you have questions, you should always talk to an expert like Mubarak Al Ketbi (MAK) Auditing.
Key Points:
- Not all business transfers are VAT-free.
- Check every detail in the contract.
- Ask for guidance from a VAT specialist in Dubai.
Distinguishing Sale of Assets from Business Transfer
Sometimes, you see asset sales in business. Only asset sales as part of a going concern transfer escape VAT. If you sell an asset alone—like a building—that deal is a normal sale, so VAT is charged. But if you sell a building along with the equipment and the buyer continues the business, this is a going concern transfer and does not attract VAT.
Important Differences:
- Sale of only an asset: VAT is charged.
- Sale of business as a going concern: No VAT, if rules are met.
- Business continuity: Buyer must continue the business.
What Conditions Qualify a Business Transfer as a Going Concern?
Not every transfer will qualify for VAT exclusion. The Federal Tax Authority says all these conditions must be met:
- Transfer the whole business or an independent part of it.
- Buyer must be a taxable person under UAE law.
- Buyer should really plan to carry on the business.
If your transfer doesn’t match these, the deal may attract VAT.
Ensuring the Buyer Is a Taxable Person
For VAT exclusion, the buyer must be taxable in the UAE. This means the buyer must either:
- Already be registered for VAT,
- Have applied for mandatory VAT registration, or
- Applied for voluntary registration and got accepted by the FTA.
Before you transfer your business, always confirm the buyer’s VAT status. If the buyer isn’t registered, you must charge VAT on the deal.
Remember:
- Confirm VAT registration before signing.
- Ask the buyer to show proof of registration.
- Mubarak Al Ketbi (MAK) Auditing helps check every detail.
Proving Business Will Continue After Transfer
To qualify as a going concern, the buyer needs to continue running the business. The seller should check and document that the buyer has real plans for the business. If the buyer doesn’t plan to keep the business running, VAT will be charged on the sale.
Checklist:
- Ask buyer for business plans.
- Get a letter or proof of intent to continue operations.
- Keep these records for future VAT audits.
What Makes Mubarak Al Ketbi (MAK) Auditing Different?
Mubarak Al Ketbi (MAK) Auditing supports every business owner with clear, expert advice. Our team works closely with clients to understand every part of the transfer. We help plan the deal and guide you with post-transfer compliance. You can always rely on us for answers.
Our Services:
- VAT compliance checks before and after business transfer
- Verification of buyer’s VAT status
- Review of business contracts for VAT risk
- Professional advice about going concern rules
For more information:
- Visit our office: Saraya Avenue Building – Office M-06, Block/A, Al Garhoud – Dubai – United Arab Emirates
- Or contact/WhatsApp: +971 50 276 2132
