Generally, a seller of second-hand goods is non-registrant dealers. Selling of good lying around is a one-time activity taken up. The threshold limit for registration of AED 375,000 is not crossed by sale through second-hand goods. Therefore, no VAT is charged on the sale of second-hand goods if the seller is a non-registrant provided threshold limit is not crossed.However, VAT is attracted to a sale of second-hand goods if a seller is a taxable person. Taxability can be analyzed for different scenarios as:
Where goods purchased from an end user and then sale to another end user
VAT on sale will be on the margin earned and not on the full sale value.
|Sale by end consumer||2,000||No VAT as the seller is not registered|
|Registered dealer (Cashconverters) purchased goods from party above||2,000||No VAT paid|
|Sale to another end consumer||3,000||VAT on AED 1,000 (3,000 – 2,000)|
|Since the purchase was from unregistered dealer no VAT on sale charged by him. Next sale made by the registered dealer then VAT charged only on the margin. Therefore, Cashconverters will charge VAT only on the margin earned|
Where the purchase was from another dealer who recovered VAT on margin basis
Here the first seller is registered seller and he recovered VAT on margin earned from sale to the second seller. Second seller if registered shall also pay VAT only on the margin earned and not on the full amount of base sale value.
Where no input tax was recovered
Cases where VAT was charged by the first supplier but the second supplier did not take credit for such VAT. VAT at the time of sale will be charged on the margin earned.
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