VAT implementation on transfer of business as going concern

A transfer of business as a going concern is a type of an asset sale which involves a transfer of title in the assets from one person to another person. This should not be considered as a supply, subject to the conditions, therefore no VAT should be charged.

A transfer of business as a going concern is a type of an asset sale which involves a transfer of title in the assets from one person to another person. For VAT purposes, it is important to distinguish between a normal sale of assets and a sale of assets as part of transfer of business as a going concern (TOGC).

Sale of assets by a taxable person is treated as a taxable supply subject to VAT at the appropriate rate except sale of bare land or residential, but when the assets are sold as part of a transfer of a business as a going concern, the transfer is not a supply at all and therefore no VAT should be charged.

Conditions to fulfill the criteria of TOGC

  1. Transfer must be as a whole or an independent part of a business and must be operational before and at the time of transfer and where the business has ceased operation before the transfer date, the transfer will not qualify as a TOGC.
  2. Transfer must be made to a taxable person, recipient of TOCG must be a taxable person or obligated to register for VAT.
  3. The recipient intends to continue the transferred business. The parties should consider the potential consequences of treating the supply as TOGC incorrectly when entering into contractual arrangements.
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