VAT Updates on Business Transfers

Historical context and current-use warning

This article was originally published in 2019 and is retained at its original URL. Rules, deadlines, authority procedures and approval status can change; use the linked official sources and current authority portal before acting.

VAT Updates on Business Transfers in UAE: VAT relief on business transfers in the UAE

VAT Updates on Business Transfers in UAE: This Public Clarification discusses the conditions that have to be met for a transfer to qualify as a transfer of a going concern under Article 7(2) of the Decree-Law.

Summary:

This VAT public clarification discusses the following issue:

In accordance with Article 7(2) of the Federal Decree-Law No. (8) of 2017 on Value Added Tax (the “Decree-Law”), 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 is not considered to be a supply for VAT purposes.

As a consequence of not being a “supply” for VAT purposes, such transfer of a business, commonly known as a “transfer of a business as a going concern” or a “TOGC”, is not subject to VAT. This rule has a compulsory application.

The VAT Public clarification discuss the following points also:

1- Share sale vs assets sale.

2- Sale of assets vs sale of business:

3- Transfer of the whole or an independent part of a business:

4- Requirements for a transfer of going concern: For a transfer not to be treated as a supply for VAT purposes, the following conditions must be met:

a. There must be a transfer of the whole or an independent part of a business;

b.The transfer must be made to a taxable person; and

c. The recipient intends to continue the business which was transferred

This Public Clarification issued by the FTA is meant to clarify certain aspects related to the implementation of the Federal Law No 7 of 2017 on Tax Procedures, Federal Decree-Law No 8 of 2017 on Value Added Tax and their Executive Regulations.
This Public Clarification states the position of the FTA and neither amends nor seeks to amend any provision of the aforementioned legislation. Therefore, it is effective as of the date of implementation of the relevant legislation, unless stated otherwise.

Related links:

Tax Audit in UAE(Opens in a new browser tab)

How tourists can get VAT refund in UAE(Opens in a new browser tab)

#1 Audit firm in Dubai – SAIF Chartered Accountants(Opens in a new browser tab)