In VAT it is very crucial to determine place of supply of every transaction. Because, place of supply is the place where supply is considered to have taken place. Taxability on a particular supply depends upon its place of supply. Where place of supply is considered to be in UAE, tax is applicable on such supply. On the other hand where place of supply is considered to be outside the territory of the state, tax can’t be imposed by the state on such supply. The rules for determining place of supply are different for supply of goods and services. Also, there are special rules for certain special cases. In this article we will discuss about place of supply of goods under VAT.

GCC member countries:  United Arab Emirates (UAE), Kingdom Saudi Arabia, Qatar, Oman, Kuwait, Bahrain.

As of today GCC VAT implementing countries: United Arab Emirates (UAE), Kingdom of Saudi Arabia (KSA) and Bahrain.

Place of supply of goods

Supply of goods can be divided into following three categories for determining place of supply:

> Domestic supplies

> Export

> Import

Domestic Supplies

Domestic supply is the supply of goods within the territory of UAE. In case of such supplies place of supply shall be considered in UAE.

Example:

M/S Gazi & Associates a registered dealer in Dubai supplies 10 mobiles @AED 1000 for each mobile set to M/S Alam & Associates in Abu Dhabi. Determine place of supply and the amount of VAT should be charged on such supply.

Solution:

As mobiles have been supplied within the territory of UAE, place of supply shall be in the UAE.

Taxable value of mobiles (10 @AED1000 each) AED 10000
VAT @5% AED  500
Invoice Value AED 10500

Export

(i) Export to any country other than GCC VAT implementing Countries: Place of supply shall be in the UAE.

Example:

M/S Rahman & Associates of Dubai has exported 5000 sets calculators in India for a price of AED 20 for each calculator. Whether place of supply shall be in UAE or India?

Place of supply in case of the above example shall be in UAE. Therefore, VAT shall be charged at the applicable rate on such supply by M/S Rahman & Associates. But according to the Article 30 of the Executive legislation of the Federal Decree Law No. (8) of 2017 on VAT, export shall be subject to zero rate.

(ii) Export to GCC VAT implementing countries

(a) Place of supply shall be outside the UAE if recipient of goods is a registered dealer in the state of destination.

(b) Place of supply shall be in the UAE if following conditions are satisfied:

      • Recipient of goods in not a registered dealer in the state of destination.
      • Total exports from the same supplier in the UAE to the state of destination do not exceed mandatory registration threshold in the state of destination.

(c) Place of supply shall be outside the UAE if following conditions are satisfied:

      • Recipient of goods in not a registered dealer in the state of destination.
      • Total exports from the same supplier in the UAE to the state of destination exceed the mandatory registration threshold in the state of destination.
Where to Export Whether the recipient is a registered person under VAT in GCC VAT implementing State? Whether total value of exports from the same exporter exceeds the mandatory registration threshold in the destination GCC VAT implementing  state? Place of supply
Export to any country other than GCC VAT implementing state. Not Applicable Not Applicable UAE

** VAT rate is ZERO

Export to any GCC VAT implementing state Yes Not Applicable Destination member state
Export to any GCC VAT implementing state No NO UAE
Export to any GCC VAT implementing state No Yes Destination member state

Import

(i) Import from any country other than GCC VAT implementing states: Place of supply shall be in UAE.

(ii) Import from GCC VAT implementing countries:

(a) Where importer is a registered person under VAT, place of supply shall be in UAE.

(b) Where importer is not a registered person under VAT

      • Place of supply shall be in UAE if total imports from the same supplier exceed the Mandatory registration threshold in UAE.
      • Place of supply shall be outside UAE if total imports from the same supplier do not exceed the Mandatory registration threshold in UAE.
Where from Import Whether importer is a registered person under UAE VAT? Whether total value of imports from the same supplier in the GCC VAT implementing state exceed the mandatory registration threshold in UAE Place of supply
Import from any country other than GCC VAT implementing state  

May/May not

 

Not Applicable  

UAE

 

Import from any GCC VAT implementing country Yes Not applicable UAE
Import from any GCC VAT implementing country No Yes UAE
Import from any GCC VAT implementing country No No Exporting country

Notes: (1) Where place of supply is in UAE, importer will pay VAT under reverse charge. (2) VAT is not applicable on import to VAT designated zones.

Place of supply of assembled and installed goods if imported into and exported from UAE:

  • Place of supply shall be in the UAE if assembly or installation of the goods was done in the UAE.
  • Place of supply shall be outside the UAE if assembly or installation of the goods was done outside the UAE.

Place of supply of water and energy where supplies are made through a distribution system:

(i) Where the recipient is a taxable person having place of residence in a GCC VAT implementing state:

Place of residence of the recipient shall be considered as place of supply.

(ii) Where the recipient is not a taxable person

Place of supply will be the place where the actual consumption takes place.

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