With respect to sale or transfer of business asset as a going concern, FTA has issues a clarification on 20 th August, 2019 vide Clarification No: VATP015. As per the UAE VAT law, if a business is transferred or sold and is continued running by the purchaser and he is registered under VAT law, then this case is considered as transfer as going concern. This supply is out of scope of UAE VAT Law, hence no VAT will be charged on the same.

Conditions to be satisfied for transfer of business as a going concern

1. Transfer must be of whole of independent part of the business.
2. The purchaser/recipient should be a taxable person.
3. The purchaser/recipient will continue the business which was purchased or received by him.

Few Clarifications:

1. Sale of shares of company doesn’t amount to sale of assets/ transfer of business. In sale of shares only the owner of company gets changed, and the company is nowhere involved in the transaction.
2. The transferred business should be in working conditions.
3. If the purchaser/recipient is not already registered under VAT, then he must have applied for VAT registration number on the date of transfer.
4. The business must be continued by the purchaser/recipient in the exact same manner how it was transferred to him. This point can be overlooked, as long as he has genuine interest in running the business.
5. Sale of only an asset, (For say, machinery) then this will attract VAT. However, if he sells Machinery along with the factory working space and this can be run independently, then this is exempt under the UAE VAT Law.

Where the supply has been incorrectly treated as a TOGC, VAT may be retrospectively due on the supply. The parties should consider the potential consequences of any such errors when entering into contractual arrangements.