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clarification on “Warranty internal manual on ‘VAT Supply services rendered in relation
repair services” (reference: VAT/ and Consideration’ (reference: to goods is where the goods
PC/20/1) adopting the said view. VATSC06200) with respect to are located at the time of
NBR considers that warranty manufacturers’ warranties. performance of the said
repair services are not separate services. As the goods would
supplies for VAT purposes In view of the above, can be located in the UAE at the
where VAT has previously been we conclude the supply of time of repair, the place of
paid on the warranty issued warranty services to overseas supply would be in the UAE
when the goods were sold. Manufacturers is out of scope of bringing the service in-scope
This applies where the cost of VAT in UAE as well? of UAE VAT.
the warranty forms an integral Although in some Jurisdictions
component cost element of the it is commonly considered that • As per the UAE VAT Legislation,
local suppliers may qualify
sales price of the goods: recovery of expenses without to zero-rate their services
markup incurred under warranty
a. From the manufacturer to the where it is provided to a non-
distributor, and thereafter repair services are out of scope, resident and the services
the same may not be applicable are not in relation to ‘real
b. From the distributor to the as per the UAE VAT legislation. estate’ or ‘movable personal
customer.
An alternative view may be that assets’ situated in the UAE.
Based on the above, a the warranty repair services Basis my experience, the
reimbursement received rendered by the distributor Federal Tax Authority in the
by the distributor from the is a separate supply from the UAE interprets ‘moveable
manufacturer relating to the original warranty issued by the personal assets’ as inclusive
costs incurred by the distributor manufacturer. Although the of all tangible goods in which
in providing the warranty repair distributor is performing the case the recovery of repair
services is out of the scope of VAT. manufacturer’s obligation on his costs under warranty repair
This applies where the distributor behalf, the recovery of expenses services would not qualify for
is reimbursed solely for the exact (even at cost) may be treated zero-rating.
cost of the repairs incurred by him as consideration for a separate
in providing the repair services supply of services, as if provided
without adding any margin.” by any third-party vendor.

The Inland Revenue Authority In addition to the above, where
of Singapore (IRAS), Singapore the distributor performs warranty
has also issued clarification on repair services on behalf of an
warranty repair by distributors overseas manufacturer, the
who seek compensation from recovery of expenses is likely
manufacturer for the costs of to attract tax at 5% for UAE VAT
repairs made under warranty. purposes, as it would not qualify
for zero-rating based on the
Her Majesty’s Revenue and below:
Customs authority (HMRC), CA Ankur Jain
United Kingdom published an • The place of supply for

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This article and/or write ups and/or any of its content shall not be treated as opinion and/or advice in any circumstances of the author(s) and/ or the Chapter. Reader’s to apply their best
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The Institute of Chartered Accountants of India (Dubai) Chapter NPIO TAX JOURNAL 2020 45