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May 15, 2026

This Public Clarification clarifies the eligibility of goods for the VAT Profit Margin Scheme. It establishes a critical condition: only goods that have previously been subject to VAT within the UAE can be sold under this scheme. This rule specifically impacts second-hand goods, antiques, and collectors' items. Consequently, stock on hand acquired before the implementation of UAE VAT, or goods otherwise not subjected to VAT on a prior supply, are ineligible. For such items, VAT must be calculated on the full selling price. The guidance is based on Article 29(2) of Cabinet Decision No. 52 of 2017.

VATP002

VAT Public Clarification

Profit margin scheme – eligible goods

Issue

It is important that businesses properly identify those goods which qualify to be sold under the profit margin scheme, in the context of transitional periods where ‘second hand’ goods may not have been subject to VAT prior to implementation of VAT in the UAE.

Summary

Only those goods which have previously been subject to VAT before the supply in question may be subject to the profit margin scheme. As a result, stock on hand of used goods which were acquired prior to the effective date of Federal Decree-Law No.(8) on Value Added Tax (“VAT law”), or which have not previously been subject to VAT for other reasons, are not eligible to be sold under the profit margin scheme.

VAT is therefore due on the full selling price of such goods.

Detailed discussion

Goods which qualify to be supplied under the profit margin scheme:

Only certain goods are eligible to be supplied under the profit margin scheme. Those goods are listed below, but may only be supplied under the scheme where they were subject to VAT before the supply which shall be subject to the profit margin scheme:

Second hand goods, meaning tangible moveable property that is suitable for further use as it is or after repair;
Antiques i.e. goods that are over 50 years old;
Collectors’ items i.e. stamps, coins, currency and other pieces of scientific, historical or archaeological interest.

Conditions to apply the profit margin scheme:

A VAT registered business may apply the profit margin scheme to eligible goods in the following circumstances:

The goods must have been purchased from either:
- A person who is not registered for VAT; or
- A taxable person who calculated VAT on the supply by reference to the profit margin i.e. a VAT registered business which already applied the profit margin scheme on the same goods.
The taxable person made a supply of the goods where input tax was not recovered in accordance with Article 53 of Cabinet Decision No. 52 of 2017.

A taxable person will not be allowed to apply the profit margin scheme in such cases where he has issued a tax invoice or any other document mentioning an amount of VAT chargeable in respect of the supply.

Goods purchased prior to the introduction of VAT: