Deemed supply as per article 11 of the Decree-law are:
- Supply of goods or services which formed whole or part assets without consideration.
- Permanent transfer of goods by a taxable person which consisted a part of his business assets from the state to another implementing state [GCC unions] or which are made as part of non- taxable supply of these goods.
- A supply of goods or services on which input tax may be recovered but the goods and services were used for the purpose other than business (in part or whole). Deemed supply only to the extent of the use for the non-business purpose.
- Goods and services owned at the date of deregistration.
Exceptions for deemed supply
The following shall not be considered as deemed supply:
- Where input tax is not recovered.
- Where supply is exempted.
- Where refunded input tax on goods and services is amended according to the capital assets scheme.
- Value of supply of goods for each recipient within 12 months does not exceed AED 500 AND Supply to be used as samples or commercial gifts.
- Total of output tax payable on all deemed supply < AED 2000 for each person for a 12 months period.
12 months period is a period preceding the end of the month in which the person makes a supply [continuous requirement –shall have to be checked at the end of every month]
Date of deemed supply of goods or services: date shall be either of
- Date of supply
- Date of disposal
- Date of change of usage
- Date of deregistration
Exceptions to deemed supply
CASE 1: When goods and services are given for free than it is considered to be deemed supply but the value of all the deemed supply for any 12 months is less than 2000 AED than it is not a deemed supply.
CASE 2: When goods & services are used for the charitable purpose than it is not a deemed supply.
CASE 3: When ITC is not recovered then it is not a deemed supply.
In case of Charitable organisation
Where goods or services are used for such charitable purposes – e.g. property made available for free for events or kitchen appliances used in providing free meals – then this is not deemed supply for VAT purposes if the relevant goods and services remain part of the assets of the charity.
On the other hand, if the charity claims VAT in respect of an acquisition of goods, and then gives them away for free outright, the supply will be treated as a deemed supply for VAT purposes. For example, where a charity has purchased food and then donated it to the poor, the charity should account for the output tax on the deemed supply of the food.
It is worth reiterating that the deemed supply rules only apply when input tax has been recovered in respect of the relevant goods or services. Therefore, where the charity does not recover VAT on the goods or services, no deemed supply of those goods or services will take place.
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