Profit Margin Scheme under UAE VAT – A Guide for Resellers | RVG
Charging VAT on second-hand goods, antiques, collector’s items, or Article 53 goods at full selling price can create tax cascading, where VAT is effectively applied multiple times. To address this, the Federal Tax Authority (FTA) introduced the Profit Margin Scheme, a special optional VAT mechanism that allows resellers to pay VAT only on their profit margin, rather than the full selling price.
Who Can Apply?
The scheme applies to resellers dealing with:
Second-hand goods (e.g., used cars, electronics, furniture)
Antiques (goods older than 50 years)
Collector’s items (stamps, coins, rare objects)
Article 53 goods, where input VAT recovery is blocked
Key Highlights
VAT is calculated on the profit margin: VAT=ProfitMargin÷21VAT = Profit Margin ÷ 21VAT=ProfitMargin÷21
Losses or break-even sales are VAT-free
Optional application for each eligible supply
Requires proper invoicing: invoice must state “VAT charged under the Profit Margin Scheme” without showing VAT separately
Prescribed record-keeping must be maintained
Must be reported correctly in the VAT Return (VAT201)
Why It Matters
The Profit Margin Scheme aligns VAT with actual economic value addition, prevents cascading, and reduces unnecessary tax for resellers. It provides a fair, practical, and compliant method for calculating VAT on eligible goods.
🔗 Read the full blog for detailed guidance, examples, and compliance tips: https://rvguae.com/vat/profit-margin-scheme-under-uae-vat/