Federal Tax Authority: Profit Margin Scheme applies only to used cars already subjected to VAT

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The Federal Tax Authority (FTA) has announced that only those goods which have previously been subject to VAT before the supply in question may be subject to the Profit Margin Scheme. As a result, stock on hand of used goods which were acquired prior to the effective date of Federal Decree-Law No. (8) on Value Added Tax (VAT law), or which have not previously been subject to VAT for other reasons, are not eligible to be sold under the profit margin scheme. VAT is therefore due on the full selling price of such goods.

The Authority had clarified the above to address questions from the audience at an awareness session recently organised at the Abu Dhabi Chamber of Commerce and Industry to raise awareness among car dealers about the procedures and tax treatment for this vital sector, as well as the efforts made by the FTA to remove obstacles facing those working in the sector.

The session brought together several car dealers, experts and other stakeholders from the industry, where the FTA team introduced them to the procedures for implementing VAT and the Profit Margin Scheme.

In a press statement issued today, FTA Director-General Khalid Ali Al Bustani asserted that the Federal Tax Authority has been committed, since the tax system went into effect, to raising awareness among all business sectors to abide by their tax obligations, by means of various media and digital channels, as well as direct contact through awareness campaigns across all seven emirates. The Authority also provides various tax awareness instruments through its website, which was designed according to international best practices.

“The Federal Tax Authority is committed to enhancing its partnerships with business sectors and providing assistance for them to fully comply with tax regulations,” Al Bustani said. “The Authority maintains constant communication with retailers, producers and service providers to identify their views and ensure a smooth and seamless implementation of the UAE tax system with minimal effects on their business activities.”