Is VAT charged on second-hand goods?

Article 29 – Accounting for Tax on the Profit Margin 15 1. The Taxable Person may calculate Tax on any supply of Goods by reference to the profit margin in the following situations: a. Where he made a supply of Goods mentioned in Clause 2 of this Article which were purchased from either: 1) A Person who is not a Registrant. 2) A Taxable Person who calculated the Tax on the supply by reference to the profit margin. b. Where he made a supply of Goods for which Input Tax was not recovered in accordance with Article 53 of this Decision. 2. The Goods to which Clause 1 of this Article refers are Goods which have been subject to Tax before the supply which shall be subject to the profit margin scheme and those Goods are: a. Second-hand Goods, meaning tangible moveable property that is suitable for further use as it is or after repair. b. Antiques, meaning goods that are over 50 (fifty) years old. c. Collectors' items, meaning stamps, coins and currency and other pieces of scientific, historical or archaeological interest. 3. A Taxable Person may not elect to calculate Tax by reference to the profit margin in respect of Goods referred to in paragraph (a) of Clause 1 of this Article if a Tax Invoice or other document is issued for that supply mentioning an amount of Tax chargeable on the supply. 4. The profit margin is the difference between the purchase price of the Goods and the selling price of the Goods, and the profit margin shall be considered to be inclusive of Tax. 5. The “purchase price” stated in Clause 4 of this Article includes, in addition to the purchase price of the Good, any costs or fees incurred to purchase the Good, provided that the Input Tax on such costs or fees, where incurred, is not recoverable pursuant to the provisions of Article 54 of the Decree-Law.16 15 Article amended as per Cabinet Decision No. 100 of 2024. 16 Clause amended as per Cabinet Decision No. 149 of 2026. Cabinet Decision No. 52 of 2017 and its amendments – As published by the Ministry of Finance 21 6. The Taxable Person must keep the following records in respect of supplies made in accordance with this Article: a. A stock book or a similar record showing details of each Good purchased and sold under the profit margin scheme. b. Purchase invoices showing details of the Goods purchased under the profit margin scheme. Where the Goods are purchased from Persons who are not Registrants, the Taxable Person must issue an invoice showing details of the Goods himself, including at least the following information: 1) The name, address and Tax Registration Number of the Taxable Person. 2) The name and address of the Person selling the Good. 3) The date of the purchase. 4) Details of the Goods purchased. 5) The Consideration payable in respect of the Goods. 6) Signature of the Person selling the Good or authorised signatory. 7. Where a Taxable Person has charged Tax in respect of a supply with reference to the profit margin, the Taxable Person shall issue a Tax Invoice that clearly states that the Tax was charged with reference to the profit margin, in addition to all other information required to be stated in a Tax Invoice except the amount of Tax. Title Six – Supplies Subject to the Zero Rate

3.3. Eligible Goods The Scheme may only be applied in respect of the following categories of Goods, provided they were previously subject to VAT: • Second-Hand Goods (see Section 3.3.1).11 • Antiques (see Section 3.3.2).12 • Collectors’ Items (see Section 3.3.3).13 Moreover, a Reseller may only apply the Scheme if the Eligible Good was subject to VAT at some point in the preceding supply chain.14 For example, any Eligible Goods which were acquired prior to the implementation of VAT (i.e. prior to 1 January 2018), or which have not previously been subject to VAT for other reasons, are not Eligible Goods for the purpose of the Scheme.15 The onus is on the Reseller intending to apply the Scheme to obtain and retain sufficient supporting evidence proving that the Eligible Goods were previously subject to VAT, for example, the Tax Invoice issued when the Non-Registrant acquired the Eligible Good. If the Reseller is unable to obtain such evidence, the Scheme would not apply and the Reseller would be required to impose VAT on the full value of the Taxable Supply. The various categories of Eligible Goods are addressed in more detail below. 3.3.1 Second-Hand Goods Second-Hand Goods are tangible moveable property that is suitable for further use as it is or after repair,16 for example used cars, mobile phones, electronic devices and furniture. Non-usable scrap is not considered as Second-Hand Goods for the purpose of the Scheme. Second-Hand Goods may be sold as they are, or they may be repaired before resale. Where repair takes place, it should not result in a change in the basic characteristics of the Good. The repair may only make the Good suitable to be used for the same function as previously. If the repair on the Good changes its basic nature, it does not meet the criteria for being treated as a Second-Hand Good, as it will be considered a new Good. 11 12 13 14 15 16 Article 29(2)(a) of the VAT Executive Regulation. Article 29(2)(b) of the VAT Executive Regulation. Article 29(2)(c) of the VAT Executive Regulation. Article 29(2) of the VAT Executive Regulation. VAT Public Clarification – Profit margin scheme – eligible goods (VATP002). Article 29(2)(a) of the VAT Executive Regulation. VAT Guide | Profit Margin Scheme | VATGPM1 8

VATP002 توضيح عام بشأن ضريبة القيمة المضافة VAT Public Clarification السلع المؤهلة- آلية هامش الربح Profit margin scheme – eligible goods الموضوع Issue It is important that businesses properly identify من المهم أن تحدد األعمال بشكل صحيح السلع المؤهلة those goods which qualify to be sold under the profit ليتم بيعها بموجب آلية هامش الربح في سياق الفترات margin scheme, in the context of transitional periods االنتقالية حيث لم تخضع السلع "المستعملة" لضريبة القيمة where ‘second hand’ goods may not have been المضافة في فترة ما قبل تطبيق ضريبة القيمة المضافة في subject to VAT prior to implementation of VAT in the .اإلمارات العربية المتحدة UAE. ملخص Summary Only those goods which have previously been تنطبق آلية هامش الربح فقط على السلع التي سبق لها أن subject to VAT before the supply in question may be .خضعت لضريبة القيمة المضافة قبل التوريد الحالي subject to the profit margin scheme. As a result, فإن مخزون السلع المستعملة التي تم شراءها قبل،ولذلك stock on hand of used goods which were acquired في شأن2017 ) لسنة8( نفاذ المرسوم بقانون اتحادي رقم prior to the effective date of Federal Decree-Law No. أو تلك،)"ضريبة القيمة المضافة ("قانون القيمة المضافة (8) on Value Added Tax (“VAT law”), or which have غير مؤهلة لبيعها،التي لم تخضع للضريبة ألسباب أخرى not previously been subject to VAT for other .وفقا ً آللية هامش الربح reasons, are not eligible to be sold under the profit margin scheme. VAT is therefore due on the full selling price of such ولذلك تستحق ضريبة القيمة المضافة على سعر البيع .الكامل لهذه السلع goods. 1

Article 54 - Recoverable Input Tax 1. The Input Tax that is recoverable by a Taxable Person for any Tax Period is the total of Input Tax paid for Goods and Services which are used or intended to be used for making any of the following: a. Taxable Supplies. b. Supplies that are made outside the State which would have been Taxable Supplies had they been made in the State. c. Supplies specified in the Executive Regulation of this Decree-Law that are made outside the State, which would have been treated as exempt had they been made inside the State. 2. Where Goods are imported by a Taxable Person through another Implementing State and the intended final destination of those Goods was the State at the time of Import, then the Taxable Person shall be entitled to treat the Tax paid in respect of Import of Goods into the Implementing State as Recoverable Tax subject to the conditions specified the Executive Regulation of this Decree-Law. 3. Where Goods were acquired by a Taxable Person in another Implementing State and then moved into the State, the Taxable Person shall be entitled to treat the Tax paid in respect of the Goods in the Implementing State as Recoverable Tax subject to the conditions specified in the Executive Regulation of this Decree-Law. 4. A Taxable Person shall not be entitled to recover any Input Tax in respect of Tax paid in accordance with Clause 2 of Article 48 of this Decree-Law. 5. The Executive Regulation of this Decree-Law shall specify the instances where Input Tax is excepted from being recovered. Article 54 (bis)22 1. The Authority shall reject the deduction of the Recoverable Input Tax if it is established to the Authority that the supply subject to the deduction was part of a supply or a chain of supplies related to Tax Evasion, and the Taxable Person was aware of this relation upon deducting the Recoverable Input Tax. 2. The Authority may reject the deduction of the Recoverable Input Tax if it is 22 Article added as per Federal Decree-Law No. 16 of 2025. Federal Decree-Law No. 8 of 2017 and its amendments – As published by the Ministry of Finance 26 established to the Authority that the supply subject to the deduction was part of a supply or a chain of supplies related to Tax Evasion, and the Taxable Person should, based on circumstances of the supply, have been aware of this relation. 3. For the purposes of applying the provisions of Clause 2 of this Article, the Taxable Person shall be considered to have been required to be aware that the supply was part of a supply or a chain of supplies related to Tax Evasion, if he did not verify the validity and integrity of the supplies he receives before deduction of Input Tax, in accordance with the measures, procedures and conditions determined by the Authority in this regard.