What is Deemed Supply in UAE VAT?

Suppliers often engage in promotional activities and offerings to customers for attracting more business. It is important for them to be aware of the applicability and impact of deemed supplies, to go by the VAT accounting and reporting rules. The UAE VAT regulation includes specific cues to check on the possibilities of deemed supplies being made and to take on the corresponding stake of VAT liability by respective suppliers. 

What is the significance of deemed supply within the perspective of UAE VAT?

Sometimes, for large retailers and conglomerates identifying the deemed supplies and applying the correct VAT treatments may become challenging, when it comes to dealing with multiple products and service lines with various incentive/ promotional packages to handle. Considering the various aspects involved in separating the taxable deemed supplies from the allowed exempted supplies based on the criteria listed down in the VAT regulation, proper identification and reporting of deemed supplies can lengthen as a time consuming exercise. Irrespective of the efforts involved in this, there is a regulatory requirement to be complied with, which makes this subject of deemed supplies a binding one to put more focus upon.

Which all supply of services or goods shall be considered as deemed supply?

The range of deemed supplies is quite extensive and this includes the gifts/samples given by the suppliers free of cost and also consumption of goods/services for personal use. There can be another scenario of deemed supply in case of any unsold items lying within the stock during the process of VAT deregistration by the supplier.

Are there any exemptions allowed in the deemed supplies as per UAE VAT?

With respect to the provisions of deemed supplies, suppliers can note that there are allowed exemptions as per the VAT regulation, which should be considered while analyzing the VAT treatments.  

Given below are the list of exemptions which will not be considered as deemed supply:

• The supplies which are already VAT exempt as per the regulation. For example, rental income from residential properties is already an exempted supply for a VAT registered property owner. In case if the owner is allowing any rent free packages of his residential property for tenants as a promotional activity, this supply of service shall not be considered as a deemed supply.
• The supply of goods or services given free of cost for which input VAT recovery has not been made by the supplier.
• In case of amendments in the input tax on supplies based on Capital Assets Scheme
• When samples or gifts are given to customers, where the value of supply for such gifts/samples to each customer does not exceed AED 500 within the last 12 months.
• When the total output tax payable for deemed supplies made in the last 12 months by the supplier does not exceed AED 2000.

Who is responsible for paying VAT on deemed supplies as per UAE VAT regulation?

As per the VAT rules, the supplier who is making the supply of deemed supplies is responsible to include them in the VAT return and pay the output VAT accordingly. Hence it is important for the suppliers to account for the deemed suppliers on a timely basis with appropriate tax treatments to report them properly in their periodic VAT returns.

It is possible to reclaim input VAT incurred on deemed supplies?

Any input VAT incurred by the supplier with respect to the deemed supplies made can be reclaimed through VAT return following the input VAT recovery rules.

How to report deemed supplies in a VAT return?

Once deemed supplies are identified by the supplier, they can be classified as taxable supplies and apply either standard rate or zero rate based on the nature of the supply. In most of the cases the deemed supplies will be taxable at a standard rate of 5% except for the specific scenarios that call for zero rate as mentioned exclusively in the VAT law. After confirming the tax rate based on the nature of the supply, the same can be included in the VAT return in respective rows as either supply as standard rate or zero rate as the case may be.

CDA in Identifying Deemed Supplies and VAT Treatments

CDA ranks as one of the top registered VAT consultants in UAE offering comprehensive VAT solutions and services to business enterprises across the region. Our experience of serving different clientele locally in UAE over these years, has bequeathed with us the knowledge and tools to identify easily the deemed supplies and incorporate the appropriate VAT calculation within the business processes. Our dedicated VAT team is equipped with the right skill set and expertise to guide you in your VAT practices and routines to ensure compliance with the applicable VAT rules and regulation. Feel free to contact us to avail our customized VAT services.

This brings us to the conclusion of the discussion on deemed supplies under UAE VAT law. Still, have queries regarding deemed supplies and their VAT treatments? Contact CDA, we can assist you in identifying deemed supplies and their VAT treatments.