What are the the method of adjusting Capital Assets and the periods for which adjustments should be made ?
1. A Capital Asset eligible for the Capital Asset Scheme shall be monitored and the Input Tax incurred shall be adjusted, as required in accordance with the provisions of UAE Value Added Tax Law and regulations made there under for the first time , over a period of either (10) ten consecutive years for buildings or parts thereof or (5) five consecutive years for other Capital Assets, commencing on the day on which the owner first uses the Capital Asset for the purposes of its Business.
2. If a Capital Asset is destroyed, sold, or otherwise disposed of before the end of the period (10 year in case of Buildings or 5 year in case of other capital assets) the Capital Asset Scheme shall cease in respect of the asset in the Tax year in which the asset was destroyed, sold or disposed of.
3. The Tax year in which the Capital Asset is acquired shall be treated as Year 1 for the purposes of the Capital Asset Scheme.
4. A Taxable Person shall keep a Capital Asset register and record therein the Input Tax incurred on the Capital Asset in Year 1 (represented by “W” in this Article) as well as details of any adjustments made to the Input Tax calculations made in relation to the respective Capital Asset.
5. The Input Tax recovered on the Capital Asset in Year 1 after any adjustment that may be due under the provisions of UAE Value Added Tax Law and regulations made there under for the first time shall be recorded together with the percentage that gave rise to that recovery (referred to as “X” in this Article).
6. At the end of each year from Year 2 on wards, the Taxable Person shall calculate the percentage of Recoverable Tax for that Capital Asset for that year in accordance with the provisions of UAE Value Added Tax Law and regulations made there under (referred to as “Q” in this Article).
7. If Q is not equal to X, the Taxable Person shall perform the calculation described as below from point (8) to (11) of this Article, and shall make an adjustment to his Input Tax.
8. The Taxable Person shall calculate an amount (referred to as “R” in this Article) as:
a. One tenth of W multiplied by Q if the Capital Asset is a building or a part thereof; or
b. One fifth of W multiplied by Q if the Capital Asset is not a buildings or a part thereof.
9. The Taxable Person shall calculate an amount (referred to as “Z” in this Article) as:
a. One tenth of W multiplied by X if the Capital Asset is a building or a part thereof.
b. One fifth of W multiplied by X if the Capital Asset is not a buildings or a part thereof.
10. Where R is more than Z, the Taxable Person shall increase his Input Tax by the difference.
11. Where R is less than Z, the Taxable Person shall reduce his Input Tax by the difference.
12. If the Capital Asset is disposed of by the Taxable Person in any year other than the final year or the Taxable Person de-registers from Tax and is required to account for tax on the asset as a Deemed Supply, the use to which the Capital Asset is deemed to have been put in any remaining years will be:
a. For making Taxable Supplies, where it is disposed of by way of a supply or Deemed Supply that is subject to Tax or would be subject to Tax were it to be made in the State.
b. For making Exempt Supplies, where it is disposed of by way of a supply that is exempt or would be exempt were it to be made in the State.
c. Not in the course of conducting Business, where is it disposed of by way of a transaction that is not deemed as supply in the course of Business, unless it is deemed as a supply according to the meaning under the provisions of UAE Value Added Tax Law and regulations made there under.
13. Where a Taxable Person transfers his Capital Assets as part of a transfer of his Business or a part thereof according to under the provisions of UAE Value Added Tax Law and regulations made there under, or to become a member of a Tax Group, or to leave a Tax Group and immediately become a Taxable Person on a stand-alone basis, then the Tax year then applying shall end on the day the Taxable Person transfers the Business or part of the Business, or becomes or ceases to be part of a Tax Group. On the next day, the next Tax year shall commence with the owner of the Capital Assets.
14. Where a Person who registers for Tax has already owned a Capital Asset for the purpose of his Business before registration for Tax, Year 1 shall be deemed to have commenced on the date of first use by that Person.
15. For the purposes of point (12) and (13) of this Article, any adjustments that may be required in respect of any such remaining years shall be included in the Tax Return relating to the Tax Period in which the Capital Asset is disposed of.
16. Any adjustments other than required under point (12) and (13) of this Article shall be made in the Tax Period mentioned under the provisions of UAE Value Added Tax Law and regulations made there under
1. A Capital Asset eligible for the Capital Asset Scheme shall be monitored and the Input Tax incurred shall be adjusted, as required in accordance with the provisions of UAE Value Added Tax Law and regulations made there under for the first time , over a period of either (10) ten consecutive years for buildings or parts thereof or (5) five consecutive years for other Capital Assets, commencing on the day on which the owner first uses the Capital Asset for the purposes of its Business.
2. If a Capital Asset is destroyed, sold, or otherwise disposed of before the end of the period (10 year in case of Buildings or 5 year in case of other capital assets) the Capital Asset Scheme shall cease in respect of the asset in the Tax year in which the asset was destroyed, sold or disposed of.
3. The Tax year in which the Capital Asset is acquired shall be treated as Year 1 for the purposes of the Capital Asset Scheme.
4. A Taxable Person shall keep a Capital Asset register and record therein the Input Tax incurred on the Capital Asset in Year 1 (represented by “W” in this Article) as well as details of any adjustments made to the Input Tax calculations made in relation to the respective Capital Asset.
5. The Input Tax recovered on the Capital Asset in Year 1 after any adjustment that may be due under the provisions of UAE Value Added Tax Law and regulations made there under for the first time shall be recorded together with the percentage that gave rise to that recovery (referred to as “X” in this Article).
6. At the end of each year from Year 2 on wards, the Taxable Person shall calculate the percentage of Recoverable Tax for that Capital Asset for that year in accordance with the provisions of UAE Value Added Tax Law and regulations made there under (referred to as “Q” in this Article).
7. If Q is not equal to X, the Taxable Person shall perform the calculation described as below from point (8) to (11) of this Article, and shall make an adjustment to his Input Tax.
8. The Taxable Person shall calculate an amount (referred to as “R” in this Article) as:
a. One tenth of W multiplied by Q if the Capital Asset is a building or a part thereof; or
b. One fifth of W multiplied by Q if the Capital Asset is not a buildings or a part thereof.
9. The Taxable Person shall calculate an amount (referred to as “Z” in this Article) as:
a. One tenth of W multiplied by X if the Capital Asset is a building or a part thereof.
b. One fifth of W multiplied by X if the Capital Asset is not a buildings or a part thereof.
10. Where R is more than Z, the Taxable Person shall increase his Input Tax by the difference.
11. Where R is less than Z, the Taxable Person shall reduce his Input Tax by the difference.
12. If the Capital Asset is disposed of by the Taxable Person in any year other than the final year or the Taxable Person de-registers from Tax and is required to account for tax on the asset as a Deemed Supply, the use to which the Capital Asset is deemed to have been put in any remaining years will be:
a. For making Taxable Supplies, where it is disposed of by way of a supply or Deemed Supply that is subject to Tax or would be subject to Tax were it to be made in the State.
b. For making Exempt Supplies, where it is disposed of by way of a supply that is exempt or would be exempt were it to be made in the State.
c. Not in the course of conducting Business, where is it disposed of by way of a transaction that is not deemed as supply in the course of Business, unless it is deemed as a supply according to the meaning under the provisions of UAE Value Added Tax Law and regulations made there under.
13. Where a Taxable Person transfers his Capital Assets as part of a transfer of his Business or a part thereof according to under the provisions of UAE Value Added Tax Law and regulations made there under, or to become a member of a Tax Group, or to leave a Tax Group and immediately become a Taxable Person on a stand-alone basis, then the Tax year then applying shall end on the day the Taxable Person transfers the Business or part of the Business, or becomes or ceases to be part of a Tax Group. On the next day, the next Tax year shall commence with the owner of the Capital Assets.
14. Where a Person who registers for Tax has already owned a Capital Asset for the purpose of his Business before registration for Tax, Year 1 shall be deemed to have commenced on the date of first use by that Person.
15. For the purposes of point (12) and (13) of this Article, any adjustments that may be required in respect of any such remaining years shall be included in the Tax Return relating to the Tax Period in which the Capital Asset is disposed of.
16. Any adjustments other than required under point (12) and (13) of this Article shall be made in the Tax Period mentioned under the provisions of UAE Value Added Tax Law and regulations made there under
Important concepts in relation to Capital Asset Scheme under UAE VAT:
What is Capital Assets ?
Business assets designated for long-term use.
Who is a Registrant ?
The Taxable Person who has been issued with a TRN (Tax Registration Number) by the Federal Tax Authority in UAE.
What is First Tax Period ?
First tax period is a specified time frame, for which Payable Tax shall be calculated and paid under UAE Value Added Tax Law and regulations made there under for the first time only by for the new registrants under Vat tax law. First tax period could range from one month to 3 months. First tax period could be of more or less period as compared to succeeding tax periods.
What is Input Tax ?
Tax paid by a Person or due from him when Goods or Services are supplied to him, or when conducting an Import as specified under the UAE VAT Law and rules & regulations made the there under from time to time.
What is Capital Assets Scheme ?
Scheme whereby the initially recovered Input Tax is adjusted based on the actual use during a specific period.
What is an Implementing States ?
The GCC States that are implementing a Tax law pursuant to an issued legislation.
What is Taxable Supply ?
A supply of Goods or Services for a Consideration by a Person conducting Business in the State, and does not include Exempt Supplies.
What is Exempt Supply ?
A supply of Goods or Services for Consideration while conducting Business in the State, where no Tax is due and no Input Tax may be recovered except as specified under the UAE VAT Law and rules & regulations made the there under from time to time.
Who is a supplier ?
A supplier is a person or business that provides a product or service to another person or business.
What is consideration ?
All that is received or expected to be received for the supply of Goods or Services, whether in money or other acceptable forms of payment.
What is business ?
Any activity conducted regularly, on an ongoing basis and independently by any Person, in any location, such as industrial, commercial, agricultural, professional, service or excavation activities or anything related to the use of tangible or intangible properties.
Who is Taxable Person ?
Any Person registered or obligated to register for Tax purposes under UAE VAT Law.
What is Tax Period ?
A specific period of time for which the Payable Tax shall be calculated and paid.
What is Goods ?
Physical property that can be supplied including but not limited to real estate, water, and all forms of energy as specified in this Decision.
What is Services ?
Anything that can be supplied other than Goods.
What is Capital Assets ?
Business assets designated for long-term use.
Who is a Registrant ?
The Taxable Person who has been issued with a TRN (Tax Registration Number) by the Federal Tax Authority in UAE.
What is First Tax Period ?
First tax period is a specified time frame, for which Payable Tax shall be calculated and paid under UAE Value Added Tax Law and regulations made there under for the first time only by for the new registrants under Vat tax law. First tax period could range from one month to 3 months. First tax period could be of more or less period as compared to succeeding tax periods.
What is Input Tax ?
Tax paid by a Person or due from him when Goods or Services are supplied to him, or when conducting an Import as specified under the UAE VAT Law and rules & regulations made the there under from time to time.
What is Capital Assets Scheme ?
Scheme whereby the initially recovered Input Tax is adjusted based on the actual use during a specific period.
What is an Implementing States ?
The GCC States that are implementing a Tax law pursuant to an issued legislation.
What is Taxable Supply ?
A supply of Goods or Services for a Consideration by a Person conducting Business in the State, and does not include Exempt Supplies.
What is Exempt Supply ?
A supply of Goods or Services for Consideration while conducting Business in the State, where no Tax is due and no Input Tax may be recovered except as specified under the UAE VAT Law and rules & regulations made the there under from time to time.
Who is a supplier ?
A supplier is a person or business that provides a product or service to another person or business.
What is consideration ?
All that is received or expected to be received for the supply of Goods or Services, whether in money or other acceptable forms of payment.
What is business ?
Any activity conducted regularly, on an ongoing basis and independently by any Person, in any location, such as industrial, commercial, agricultural, professional, service or excavation activities or anything related to the use of tangible or intangible properties.
Who is Taxable Person ?
Any Person registered or obligated to register for Tax purposes under UAE VAT Law.
What is Tax Period ?
A specific period of time for which the Payable Tax shall be calculated and paid.
What is Goods ?
Physical property that can be supplied including but not limited to real estate, water, and all forms of energy as specified in this Decision.
What is Services ?
Anything that can be supplied other than Goods.
