Will VAT Apply on Pre-Owned Items in UAE

The UAE introduce the New VAT Rules. The rule will apply to any used Pre-Owned Items such as household items, furniture, automobiles, and electronics. Recently the FTA (Federal Tax Authority) announce the news of five percent on the sale and purchase of a used product such as cars and furniture etc.

Anurag Chaturvedi, managing partner, Chartered House said “That product purchased Before on 1st Jan 2018, the customer will have to pay the VAT on full-price but if the product has bought in this year so then the seller can claim VAT only on the profit margin and not on the entire value of the pre-owned product.

Chaturvedi said with an example that is a car dealer bought a car in Dh50,000 in last year. After he sells it in 2018, so the VAT amount on full price, it means the VAT on the entire Dh50,000 amount. But if that car dealer bought the car for Dh50,000 this year from a seller who purchased it after paying VAT and when he sells to a buyer for Dh60,000, so it only pays the VAT only for margin, not the full price.

pre-Owned Item Market size graph

This rule will apply VAT on pre-owned items in UAE only for household items, furniture, automobiles, and electronics etc.

In another important explanation, Anurag Chaturvedi, managing partner, Chartered House said the FTA has clarified that customers will pay VAT on the regulated banking services such as a loan, and other processing charges as per the recent Central Bank Amendment.

The FTA has clarified that the businesses and person are not required to rework their tax invoices if they were issued before to May 17, 2018 where they used a credible source for reciprocation rates instead of the UAE Central Bank exchange rate.

The same source has been used continuously from January 1 to May 16. But the invoices issued after May 17 has to use the UAE Central Bank exchange rates.

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