Capital Asset Scheme in UAE VAT :
A scheme whereby the initially recovered Input Tax is adjusted based on the actual use during a specific period.
Under this scheme the taxable person shall assess the period of use of such asset and make the necessary adjustments to the Input Tax paid pursuant to the Capital Assets Scheme in cases where a Capital Asset is supplied or imported. Under the records related to Capital Assets are to be kept by the taxable person for at least ten years. In cases where the Capital Assets are real estate then the records must be kept for fifteen years.
What assets are considered Capital Assets ?
What are Capital Assets subject to the provisions of Capital Asset Scheme in UAE VAT and their estimated useful life ?
As per the regulations made under UAE Value Added Tax Law a Capital Asset is a single item of expenditure of the Business amounting to AED 5,000,000 or more excluding Tax, on which Tax is payable and which has estimated useful life equal or longer than:
a. 10 years in case of a building or a part thereof.
b. 5 years for all Capital Assets other than buildings or parts thereof.
Capital Assets do not include Items of stock, which are for resale.
Expenditure consisting of smaller sums which collectively amount to AED 5,000,000 or more shall be treated as a single item of expenditure of AED 5,000,000 or more for the purposes of this Article where the sums are staged payments for any of the following:
a. For the purchase of a building.
b. For the construction of a building.
c. In relation to an extension, refurbishment, renewal, fitting out, or other work undertaken to a building, except that where there is a distinct break between any such works being undertaken they shall be taken to be separate items of expenditure.
d. For the purchase, construction, assembly or installation of any goods or immovable property where components are supplied separately for assembly.
What are Capital Assets subject to the provisions of Capital Asset Scheme in UAE VAT and their estimated useful life ?
As per the regulations made under UAE Value Added Tax Law a Capital Asset is a single item of expenditure of the Business amounting to AED 5,000,000 or more excluding Tax, on which Tax is payable and which has estimated useful life equal or longer than:
a. 10 years in case of a building or a part thereof.
b. 5 years for all Capital Assets other than buildings or parts thereof.
Capital Assets do not include Items of stock, which are for resale.
Expenditure consisting of smaller sums which collectively amount to AED 5,000,000 or more shall be treated as a single item of expenditure of AED 5,000,000 or more for the purposes of this Article where the sums are staged payments for any of the following:
a. For the purchase of a building.
b. For the construction of a building.
c. In relation to an extension, refurbishment, renewal, fitting out, or other work undertaken to a building, except that where there is a distinct break between any such works being undertaken they shall be taken to be separate items of expenditure.
d. For the purchase, construction, assembly or installation of any goods or immovable property where components are supplied separately for assembly.
What are the instances in which the period for keeping records of Capital Asset records is extended ?
In case of records related to a real estate. It is required to be kept for a period of 15 years after the end of the Tax Period to which they relate.
In case of records related to a real estate. It is required to be kept for a period of 15 years after the end of the Tax Period to which they relate.
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.
