Consignment sales can create practical challenges in determining the correct VAT treatment, especially when assessing the place of supply. Businesses must monitor the movement and timing of goods closely to ensure accurate VAT reporting and avoid penalties arising from mistakes in Emirate wise declarations.

Under UAE VAT rules, when an agent sells consigned goods within twelve months, the place of supply is considered to be the location of the agent. At that point, VAT becomes due and must be reported accordingly.

If the goods remain unsold after twelve months, the principal is required to account for output VAT as though a supply has taken place. In such cases, VAT reporting must reflect the principal’s Emirate of residence, even if the goods are physically located elsewhere.

For businesses operating through consignment arrangements, it is essential to clearly define the roles of the principal and the agent and to understand the place of supply rules. This clarity ensures proper VAT compliance, reduces the risk of reporting errors, and supports better management of tax obligations.

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