Out of Scope Supplies are supplies that do not come under the VAT provisions of UAE. Although Out of Scope, exempt and zero-rated supplies does not increase the VAT liability of a supplier, exempt and zero-rated supplies of goods and services come within the bracket of VAT provisions of UAE.

More about Out of Scope supplies….

             If an overseas supplier or a non-registered entity supplies goods to an overseas person, these supplies will be considered out-of-scope for VAT in the UAE.
For example, a local trader A sells goods to local company B. The goods are shipped directly from Company A’s factory in Singapore to Company B’s branch in London through 3rd port shipment. The goods do not pass through the UAE, so the sale of these goods is an out-of-scope supply.

There are two basic kinds of out-of-scope supply:

(i) When goods are purchased from an overseas supplier and sold to an overseas customer, without being brought into the UAE, it is considered Out-of-scope of VAT.

(ii) import to free zone and export from freezone,

(iii) purchase and sale within the free zones of goods, when place of supply is not in UAE

The following are the examples of Out of Scope supplies:

  • Supplies from a non-registered entity,
  • Certain government activities,
  • Goods or services provided to a different department within the same business,
  • Supplies not made in the course or furtherance of a business,
  • Transfer of business as a going concern etc.

Note : A supplier whose business is involved only in goods that are qualified as Out of Scope, are not required to register with the FTA. In such a case, Input Tax Credit on the purchases made or expenses incurred to supply these goods has to be added to the cost of the purchase/expense as he cannot claim that amount.