Is VAT charged on a sale of a whole business?
No VAT is charged if you sell the whole business as a going concern to a taxable person (registered for VAT) who continues the business; otherwise the sale is a normal taxable supply.
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The detail
No VAT arises. Article 7(2) of Federal Decree-Law 8 of 2017 treats the transfer of the whole or an independent part of a business from one person to a taxable person for the purpose of continuing that business as not a supply, so no output tax is due. This applies irrespective of the VAT treatment of the underlying assets, provided the transfer qualifies as a transfer of a business as a going concern (TOGC). If the conditions are not met, the sale of assets is a taxable supply at the applicable rate (e.g. 5% for most goods).12
What the law says
- Article 7(2) of the VAT Decree-Law provides an exception to the general supply rules: the transfer of a whole or independent part of a business to a taxable person for continuing the business is not a supply.1
- The FTA's TOGC guidance (public clarification) confirms that a qualifying transfer is not a supply and no VAT is charged, and it lists the requirements: transfer of the whole or an independent part of a business, made to a taxable person.2 Based on FTA guidance
What it depends on
Check before you rely on it
- Confirm the buyer is VAT-registered (or required to register) at the time of transfer.
- Verify the sale covers the whole or an independent part of the business, not only selected assets.
- Ensure the buyer is continuing the same business after the transfer.
Sources (2) — read the official text
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Article 7 – Supply in Special Cases9
Read the article
Article 7 – Supply in Special Cases9 As an exception to what is stated in Articles 5 and 6 of this Decree-Law, the following shall not be considered a supply: 1. The sale or issuance of any Voucher unless the Consideration received in respect thereof exceeds its advertised monetary value, as specified in the Executive Regulation of this Decree-Law. 2. The transfer of whole or an independent part of a Business from a Person to a Taxable Person for the purposes of continuing the Business that was transferred. 3. Any other supply specified in the Executive Regulation of this Decree-Law.
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Read the article
appropriate rate. In some limited situations – for يجوز إعفاء بيع أرض فضاء أو بيع، على سبيل المثالexample, where there is a sale of bare land or .مبنى سكني من الضريبة لغايات ضريبة القيمة المضافة residential property – the supply may be exempt for VAT purposes. In contrast, where assets are sold as part of a في حال تمّ بيع األصول كجزء من انتقال،في المقابل transfer of a business as a going concern, the ً فال يُعامل هذا النقل على أنه توريدا،األعمال كمنشأة عاملة transfer is not a supply at all and therefore no VAT .على اإلطالق وبالتالي ال تُستحق ضريبة القيمة المضافة is charged. This treatment applies to a transfer of تُطبق هذه المعاملة على نقل األعمال بغض النظر عن معاملة the business irrespective of the VAT treatment ضريبة القيمة المضافة التي كانت لتُطبق على أي من which would apply to any of the underlying assets .األصول األساسية التي يتم نقلها that are being transferred. For example, a manufacturer selling its factory ّ قيام مُ صنّع ببيع مبنى المصنع وحده يُعد،فعلى سبيل المثال building on its own is a supply of a good and is ومن ناحية .%5 توريداً لسلع يخضع للضريبة بنسبة subject to VAT at 5%. On the other hand, the ، قيام المُ صنّع ببيع مصنعه إلى جانب معدات التصنيع،أخرى manufacturer selling the factory building together يُعد نقل ألعمال كمنشأة،والتوريدات وعقود الموظفين with manufacturing equipment, and employment عاملة وبالتالي ال يعتبر توريدا ً لغايات ضريبة القيمة and supply contracts may be a transfer of business .المضافة as a going concern, and therefore not a supply for VAT purposes. :متطلبات انتقال األعمال كمنشأة عاملة Requirements for a TOGC: For a transfer not to be treated as a supply for VAT حتى ال تتم معاملة انتقال األعمال كمنشأة عاملة كتوريد يجب أن يكون االنتقال،لغايات ضريبة القيمة المضافة purposes, the following conditions must be met: :مستوفيا ً للشروط اآلتية There must be a transfer of whole or an يجب أن يتم نقل األعمال بالكامل أو جزء مستقل منها؛ يجب أن يتم النقل إلى خاضع للضريبة؛ independent part of a business; The transfer must be made to a taxable person; and 3
Written by AI from the FTA sources above and checked before display. Not tax advice or official FTA information - confirm with a tax adviser before you act. Full disclaimer
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