Deemed supply: what it means in UAE tax.

What deemed supply means

A deemed supply is something the VAT law treats as a taxable supply even though there is no sale. It stops a business from recovering input tax on goods or services and then using them outside the business, giving them away, or keeping them after it leaves the VAT system.

The law lists the cases: business assets given away without consideration, goods or services with recovered input tax that are used wholly or partly for non-business purposes, certain transfers of goods between the UAE and another GCC implementing state, and goods and services held at the date of deregistration.

There are exceptions. No deemed supply arises where no input tax was recovered, where the supply is exempt, or where the input tax has already been adjusted under the capital assets scheme. Samples and commercial gifts worth AED 500 or less per recipient in 12 months are also outside, and output tax on deemed supplies up to AED 2,000 per supplier in 12 months is relieved.

How it works

• The value of a deemed supply is generally the total cost to the business of the goods or services used.
• For deemed supplies of services, FTA Directive No. 5 of 2026 sets how to work out that cost, including direct and indirect costs.
• The date of supply is the date of the gift, disposal, change of use or deregistration.
• A tax invoice must be issued, and kept in the business's own records where there is no recipient.
• Under the Executive Regulation, output tax on all deemed supplies above AED 2,000 per supplier in a 12 month period is payable.

Worked example

An electronics retailer reviews the last 12 months. The owner took stock home for family use, and the business donated goods to a community event. Input tax was recovered on all of it.

Cost of stock taken for private use	AED 30,000
Output tax at 5% on private use	AED 1,500
Cost of goods given away at the event	AED 20,000
Output tax at 5% on goods given away	AED 1,000
Total output tax on deemed supplies	AED 2,500
Relieved amount per supplier for 12 months	AED 2,000
Output tax payable on deemed supplies	AED 500

Only the output tax above the AED 2,000 relief becomes payable under the Executive Regulation.

Common mistakes

• Recovering input tax on goods and then using them privately without accounting for a deemed supply.
• Treating every gift as covered by the AED 500 limit, which applies to samples and commercial gifts per recipient over 12 months.
• Forgetting that stock and assets held on deregistration are deemed supplies.

The law

• Federal Decree-Law No. 8 of 2017 on Value Added Tax, Article 1 (definition of Deemed Supply), Articles 11, 12, 26 (Clause 3), 37 and 65 (Clause 2)
• Cabinet Decision No. 52 of 2017 (Executive Regulation of the VAT law), Article 5
• FTA Directive on Tax Transactions No. 5 of 2026 on valuation of deemed supplies of services

Frequently asked questions

Are free samples to customers a deemed supply?

Not if they are samples or commercial gifts and the value to each recipient does not exceed AED 500 in a 12 month period. Above that, a deemed supply can arise if input tax was recovered.

Is there a deemed supply if I never claimed the input tax?

No. The law excludes cases where no input tax was recovered on the goods or services concerned.

Related terms

Taxable supply · Output tax · Input tax · Time of supply · Capital assets scheme. See every term in the UAE tax glossary.

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