FTA Issues Updated VAT Guide on the Profit Margin Scheme (January 2026)

The Federal Tax Authority (FTA) has released its updated VAT Guide on the Profit Margin Scheme (VATGPM1 – January 2026), providing further clarity on how VAT should be applied when reselling eligible goods in the UAE.

Key Highlights:

• The scheme applies to second-hand goods, antiques, and collectors’ items, provided the goods were previously subject to VAT and no input tax was claimed.
• VAT is calculated only on the profit margin (Selling Price – Purchase Price), not on the full selling price.
• The profit margin is VAT-inclusive, meaning VAT is extracted from the margin.
• Where goods are sold at a loss or at break-even, no VAT is payable.
• Resellers must maintain proper records and issue tax invoices stating “VAT charged under the Profit Margin Scheme”, without separately disclosing the VAT amount.
• The scheme helps prevent VAT cascading, particularly when goods are purchased from non-registrants or where input tax recovery is blocked under Article 53 of the VAT Executive Regulation.

Example:

A business purchases used machinery for AED 120,000 and later resells it for AED 150,000.

Profit Margin = AED 30,000

VAT payable = AED 30,000 × (5 ÷ 105)

VAT = AED 1,428.57

Why it matters:

This updated guidance enhances certainty for businesses dealing in eligible goods, reduces compliance risks, and ensures fair VAT treatment in the resale market.

📄 Download the full FTA VAT Guide on the Profit Margin Scheme (VATGPM1 – January 2026) here: [Value Added Tax Guide]