A taxable supply is defined in the VAT legislation as a “supply of goods or services for a consideration by a person conducting business in the UAE and does not include an exempt supply”.
The following conditions would generally need to be met for taxable supply:
- there needs to be a supply of goods or services;
- the supply has to be for consideration; and
- the supply has to be made by the person who is conducting business in the UAE.
Two major requirements for a supply to be taxable supply are:
consideration and use of supply for business
A supply has to be for “consideration”
“Consideration” is a defined term in the VAT legislation and includes
- anything that is received or expected to be received for the supply of goods or services,
- whether in money or other forms of payment.
The supplier of any goods and services has to carefully consider what it receives in return for any supply made by it.
The supplier should not only consider any monetary benefit being received but also any goods or services that it may be receiving in exchange. Covering transactions of barter exchange also under consideration
A supply has to be by a person conducting business in the UAE
The next requirement for a taxable supply is that the supply has to be made by the person who is conducting business in the UAE.
It is important to understand the difference between business and non-business activities. The definition of “business” is very broad and includes any regular or ongoing activity conducted independently by a person.
Due to the requirement that a business must be an independent activity, activities of employees will not be treated as being in the course of business. As such, employees will not charge VAT in respect of their employment.
In contrast, activities of independent contractors would be in the course of business and therefore can give rise to the requirement to charge VAT.
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