Value of supply for goods and services in usual case shall be the consideration received less the tax. Suppose Consideration received for supply of some product is AED 400 then it would be taken as AED 400 is including 5% of VAT. In this case, Value of supply is AED 381 and VAT at 5% is AED 19.However, Article 36 specifically defines value of supply of goods or services when the supply is made to related party. Value of supply for related party shall be calculated as:

Value = value recovered unless.

  1. Value of supply is less than market value then Value of supply = market value
  2. Tax credit on supply < tax credit that would have been available on normal supply then Value of supply = market value.

Two parties can be said to be related either for the purpose of forming tax group or if they are associated in economic, financial, and regulatory aspects

For the purpose of tax groupAssociated in economic, financial, and regulatory aspects
In case of partnershipIf each of them is a related party with a third person.

For example: A is related to B and B is related to C

Then A shall be deemed related to C

  • Voting interests in each of those legal persons of 50% or more [legal interest of more than 50% in each other]
  • Economic
  1. achieving common business objectives.
  2. benefiting each other’s business.
  3. supplying goods and services by different business to the same customer.
  • Market value interest in each of those legal persons of 50% or more


Market value of interest = market value of the shares and options owned/ total market value of all shares of the legal person


  • Financial
  1. financial support to each other.
  2. financial liability on each other’s business.
  3. common financial interest in proceeds.
  • Control of each of those legal persons by any other means.
  • Regulatory
  1. common management
  2. common employees
  3. common shareholder or economic ownership.

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The entire contents of this article is solely for information purpose and have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation.. It doesn't constitute professional advice or a formal recommendation. The author has undertook utmost care to disseminate the true and correct view and doesn't accept liability for any errors or omissions. You are kindly requested to verify & confirm the updates from the genuine sources before acting on any of the information's provided herein above.

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