PROFIT MARGIN SCHEME

  • This scheme applies to used tangible moveable goods (that can be used further), antiques (more than 50 years) and collections (stamps, coins, currency notes, scientific and archeological goods)
  • To calculate registration threshold, consider full sales value, not the profit margin only. Example: if MR. A has total used mobiles sales during past three months is AED 400K and his profit margin on these sales is only 25k then he is immediately liable to register as it crosses mandatory vat registration threshold limit of AED 375K. Therefore, ignore the profit margin amount while calculating vat threshold for vat registration.
  • Vat will be inclusive of profit margin.

    • Example
    If Mr A purchase used mobile from unregistered person . The figures are given below:
    Mobile purchased price: 5000
    Mobile sale price: 5500
    Profit: 500
    Vat under profit margin Scheme: (500/21= 23.81)

    Vat Return Disclosure:
    Box no 1 : Net sales : 5,476.19 (5500-23.81) Vat: 23.81
    Box no 9: Purchases : 5000 Vat: 0 (Even you pay vat , but its not allowed to recover under profit margin scheme.

    • In vat return (have you used profit margin scheme question, Please select option ‘’yes’’ in vat return )

    Eligible Goods Criteria:

    • The goods should be purchased from unregistered person or
    • The seller of goods is operating under profit margin scheme and
    • Input vat on goods is not claimed by the seller if he is selling those goods under profit margin scheme.
    • The stock of goods purchased before vat implementation date is not eligible for this scheme. The eligible goods will be, if it is purchased after 1 jan 2018 and buyer should make sure that the seller who is selling these goods also have purchased these goods after 01 jan 2018.
    • The goods should be subject to taxable supplies

    Records:

    • Maintain stock register that shows sale and purchase record of inventory sold under this scheme
    • Keep record of purchase and sales invoices
    • If goods are purchased from unregistered seller, then buyer is responsible to make purchase invoice by himself that will include following:
      1. 1.Seller details like name, address etc
      2. 2.Buyer details like name, address, TRN etc
      3. 3.Date of purchase
      4. 4.Detail of items purchased
      5. 5.The purchase invoice should be signed by the seller or his authorized signatory.

    Sale Invoice:

    • It should be specifically written on the sales invoice that this invoice is prepared under profit margin scheme as vat amount will be low
    • Remaining contents of sales will be same as normal tax invoice