Understanding Deemed Supply in UAE VAT
Businesses in the UAE often give gifts, samples, or free services to promote their products. Every supplier should know what is a deemed supply in UAE VAT. The law says suppliers must include some free items or services as deemed supplies in their VAT records. Deemed supply rules make sure businesses pay the right VAT even if they don’t receive payment for every good or service given away.
What Is the Significance of Deemed Supply for UAE VAT?
Large retailers or businesses may offer many incentives, promotions, or free products. They must know when a free product or service counts as a deemed supply. Identifying and reporting deemed supplies can take time because of all the rules. Still, UAE VAT law requires every supplier to follow these rules for full compliance.
- Deemed supplies make sure VAT is applied to goods/services given without charge.
- Correct VAT reporting avoids penalties and keeps business in compliance.
- UAE businesses must carefully review all promotional and free items given to customers.
Which Goods or Services Are Counted as Deemed Supply?
The range of deemed supplies is broad. According to UAE VAT law, deemed supply includes:
- Goods or services used for personal benefit, not business
- Free gifts or product samples above a certain value
- Goods left unsold in stock when a business cancels VAT registration
- Goods taken out of business for any non-business use
If you fit any of these cases, you should treat those items as deemed supplies for VAT purposes.
Are There Any Exemptions from Deemed Supply in UAE VAT?
Yes, UAE VAT law allows some exemptions for deemed supply. Suppliers should check these before calculating VAT.
Here are some main exemptions:
- Supplies already exempt from VAT (e.g., residential rent)
- Free goods or services where no input VAT has been claimed
- Adjustments made under the Capital Assets Scheme
- Samples or gifts to a single customer not exceeding AED 500 in value within 12 months
- Total output tax on deemed supplies within 12 months does not exceed AED 2,000
If your transaction meets any of these, you don’t have to treat it as a deemed supply.
How to Report Deemed Supplies in a VAT Return
Every business must report deemed supplies in their VAT returns properly. You should:
- Identify all goods and services given free or for personal use
- Decide if exemptions apply as per UAE VAT law
- Classify deemed supplies as standard or zero-rated as required
- Enter the amounts in the correct section of the VAT return
- Keep records and invoices as proof
In most cases, you’ll pay 5% VAT on deemed supplies. Sometimes, specific supplies qualify for zero-rating if the law says so.
Who’s Responsible for VAT on Deemed Supplies?
The supplier is always responsible for including deemed supplies in VAT returns. You must calculate VAT on such supplies and pay it along with your usual VAT return. Keeping accurate records is vital to show FTA that you followed the rules.
Can You Reclaim Input VAT on Deemed Supplies?
Yes, if you have followed VAT rules, you can reclaim input VAT on goods or services counted as deemed supplies. You must meet all the normal recovery requirements, like keeping proper invoices and showing the goods/services were originally bought for business.
What Can Mubarak Al Ketbi (MAK) Auditing Help You With?
You shouldn’t let VAT rules put you “in a pickle.” Mubarak Al Ketbi (MAK) Auditing helps you:
- Identify all deemed supplies in your business
- Calculate and report the right VAT amount
- Classify supplies and check exemptions
- Prepare your VAT return to meet FTA rules
- Keep you updated with the latest UAE VAT changes
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
