- Entity to be registered in Mainland or Designated zone
- Trading consist of back to back shipment (seller in country X &buyer in country Y)
- Goods not entering UAE
- It’s intermediary trade
Question:
1) Is the proposed entity is required to pay VAT on given transaction?
2) Can Input tax credit be claimed on expense incurred and paid?
Question 1: Is theproposed entity is required to pay VAT on given transaction?
Reply: No, Proposedentity (whether in designated zone or mainland) is not required to charge VATon out of scope of VAT Transactions as neither goods are entering the UAE norownership in said goods are transferred by or to proposed entity.
Question 2: Can Inputtax credit (ITC) be claimed on expense incurred and paid?
Reply: Yes, ITC can beclaimed on the VAT charged on proper tax invoice for business expenses, as inthe law - VAT charged on expenses incurred with respect to exempted supplyshall not be allowed to claim as ITC and further, Law does not expresslydecline the claiming the ITC on expenses related to out of scope transaction.
Law:
Supply of Goods: Thefollowing shall be considered a supply of Goods:
1. Transfer ofownership of the Goods or the right to use them to another Person according towhat is specified in the Executive Regulation of this Decree-Law.
2. Entry into acontract between two parties entailing the transfer of Goods at a later time,pursuant to the conditions specified in the Executive Regulation of thisDecree-Law.
Import: The arrival ofGoods from abroad into the State or receipt of Services from outside the State.
Export: Goodsdeparting the State or the provision of Services to a Person whose Place ofEstablishment or Fixed Establishment is outside the State.
