12 Jan VAT implication on FOCs and/or Samples
As per article (5) of the cabinet decision 52, if the value of supply of goods as commercial gifts, sample or FOC, within 12 months, is more than 500 AED per customer or AED 40,000 for a company as a whole, tax shall be charged on the excess amount as per standard rate (5%) on cost value.
If FOC transactions are related to composite item sale as per article (4) of the cabinet decision 52 (composite sales item will explain in another blog), VAT shall not be charged on FOCs since that would be considered as part of the sale of the principal item.
However, if machine or equipment is sold before 2018 without charging the standard VAT rate, FOC shall not be considered as part of composite item and article (5) of the cabinet decision 52 shall be applied.
Further, please note that all independent transactions of supply of goods as sample or FOC, which are not part of any previously sold machine or equipment and cross the above-mentioned limit, are vatable and shall be charged with the standard rate (5%).