The Federal Tax Authority (FTA) has called on retailers to verify that used cars were subject to the value added tax (VAT) before applying the Profit Margin Scheme, during an awareness workshop for car dealers.

The workshop applauded the high tax compliance rate and increased tax awareness among businesses in the automotive sector, and reiterated its commitment to empowering businesses. The authority also introduced various procedures and tax treatment for the key sector, highlighting the FTA’s steps to address any obstacles that businesses face. More than 100 dealers, experts and stakeholders participated in the workshop, which was organised by the FTA in collaboration with the Dubai Municipality and Al Aweer Auto Market in Dubai.

“Tax laws in the UAE have prioritised the establishment of an environment conducive to continued growth and prosperity in commercial activities – a sector of great importance in the government’s plans to diversify sources of income,” FTA director-general, Khalid Ali Al Bustani, asserted.

The FTA experts presented a detailed explanation of the procedures and legalities surrounding VAT on the sale of new and used vehicles. They also shed light on the Profit Margin Scheme, its terms and conditions, the supplies eligible for it, and the obligations for the Taxable Person.

The authority’s representatives asserted that according to Federal Decree-Law No. (8) of 2017 on VAT and Cabinet Decision No. (52) of 2017 on the Executive Regulations of said Decree-Law, the Profit Margin Scheme is only applicable to supplies that already incurred VAT prior to the current supply. Therefore, the stock of used goods purchased before Federal Decree-Law No. (8) of 2017 went into effect (or that didn’t incur tax for any reason) do not qualify for the Profit Margin Scheme, and VAT is instead calculated on the items’ full price.