When the transfer of a business as a going concern is outside the scope of VAT, and the conditions that must be met.
Transfer of Business as a Going Concern (TOGC)
A transfer of a business as a going concern (TOGC) is outside the scope of VAT — no VAT is charged on the transfer. This applies when a business is sold as a complete operating entity, not just its assets.
Conditions for TOGC Treatment
All of the following must be met:
The seller transfers the entire business or an independent part of the business.
The buyer is a registered taxable person (or registers as a result of the transfer).
The buyer continues the same type of business.
There is no significant break in the normal business operations.
The seller transfers all assets necessary for the business to continue operating.
The seller and buyer agree in writing that the transfer is a TOGC.
Goodwill: The business's reputation and customer relationships
Employees: Staff may transfer under their existing contracts
VAT Treatment
No VAT is charged on the transfer of the business.
The buyer inherits the seller's input tax recovery rights on assets.
The seller does not need to account for output tax on the deemed supply of assets.
The buyer can continue using the seller's VAT registration (if transferring the whole business) or must register separately.
When TOGC Does NOT Apply
Sale of individual assets (not the whole business)
Sale of shares in a company (share deal — no VAT anyway)
Transfer of a business to a buyer who does not continue the same type of business
Asset sale where the buyer is not registered and does not register
Worked Example
A Dubai restaurant owner sells their entire restaurant business (equipment, inventory, lease, recipes, customer list, staff contracts) to a buyer who will continue operating it as a restaurant. The buyer is registered for VAT. This is a TOGC — no VAT is charged on the transfer. If the owner had only sold the kitchen equipment (not the whole business), it would be a standard asset sale subject to 5% VAT.
Practical UAE example
**Dubai Restaurant Sale**: A restaurant owner sells the entire business (equipment, inventory, lease, staff contracts, customer database) to a buyer who continues operating it as a restaurant. The buyer is VAT-registered. Both parties agree in writing that it is a TOGC. No VAT is charged on the AED 1M sale price. The buyer inherits the input tax recovery on the kitchen equipment and continues filing VAT returns. If only the kitchen equipment were sold (AED 200,000), it would be a standard asset sale with 5% VAT (AED 10,000).
Key takeaways
TOGC is outside the scope of VAT — no VAT charged.
Conditions: entire business transferred, buyer registered, same business continued.
Buyer inherits input tax recovery rights on transferred assets.
TOGC does not apply to individual asset sales or share deals.
Authoritative sources
Federal Decree-Law No. 8 of 2017 on Value Added Tax
United Arab Emirates — Federal Tax Authority · The VAT Law — Articles 1 to 82 (as amended by Federal Decree-Law No. 18 of 2022)
Effective: 1 Jan 2018Verified: 5 Oct 2026View source
Cabinet Decision No. 52 of 2017 on the Executive Regulations of the Federal Decree-Law No. 8 of 2017 on VAT
United Arab Emirates — Cabinet / Federal Tax Authority · Executive Regulations (as amended by Cabinet Decisions No. 46/2020, 24/2021, 88/2021, 99/2022, 100/2024, and 100/2025)
Effective: 1 Jan 2018Verified: 5 Oct 2026View source
FTA — VAT Guides, References & Public Clarifications
UAE Federal Tax Authority · Taxable person guides, tax invoice guides, input tax guides, designated zones, real estate
Effective: 1 Jan 2018Verified: 5 Oct 2026View source
Knowledge check
1. When is a transfer of business outside the scope of VAT (TOGC)?
This lesson is general educational content, not individualized tax or legal advice. Always consult a qualified professional for your specific situation.