Share vs. Asset Purchase in Dubai: Which Structure Saves You More on VAT?
Thinking about buying a business in Dubai? You’ve got two ways in. You can grab the company whole by buying its shares. Or you can cherry-pick what you want through an asset purchase. Both get you control. Both have perks. But one of them can save you a big pile of money on VAT.
A lot of people miss this. They see the deal price and forget about the tax. Suddenly 5% of millions is on the table. So let’s talk clearly. No nonsense. How does VAT really work on these deals in the UAE? And which option leaves you with more in your pocket?
Understanding VAT in Dubai (2025 Update)
First, let’s be blunt about VAT in Dubai. It’s 5%. That’s the standard rate. It applies to most goods and services, no matter how fancy your lawyer is. But it doesn’t hit everything equally. Some things are zero-rated or exempt. Exports. Certain healthcare and education. And crucially for us—some financial services.
If you’re running a business that makes more than AED 375,000 in taxable turnover, you have to register for VAT. No tricks. No wriggling out of it. So when you’re buying a business, you can’t ignore this. It’s not some optional footnote in your due diligence report. It’s core to the cost.
What is a Share Purchase?
When you buy shares, you don’t buy the company’s stuff. You buy the company itself. The assets, the liabilities, the staff, the contracts, everything stays where it is. The only thing that changes is the ownership on paper.
Sounds simple? That’s because it is. And the best part? The UAE treats the sale of shares as a financial service. Financial services are generally exempt from VAT.
So you don’t pay 5% on the transaction value. Whether you’re buying for AED 1 or AED 100 million. Sure, you’ll pay legal fees. Maybe some regulatory charges to update shareholding records. But VAT? Zero. That’s why share deals are so popular. Clean. Predictable. No nasty VAT surprises.
VAT Impact on Share Purchases
- No VAT on Shares: Buying or selling business in the UAE is generally exempt from VAT.
- Financial Services: Shares fall under financial services, which are not subject to VAT.
- No VAT on Price: You don’t pay or charge VAT on the transaction value.
- Regulatory Fees: You may still pay fees for updating shareholder records or approvals, but these fees don’t include VAT either.
- Keep Records: Always keep proper paperwork for any share transfer, even if VAT doesn’t apply.
What is an Asset Purchase?
Now, let’s talk asset purchases. These can look attractive. You don’t want the whole company? No problem. Pick the assets you want. Buy the property, the equipment, the stock. Leave the debts and lawsuits behind.
Sounds great. Until the taxman shows up. Because when you buy assets, you’re not buying financial services. You’re buying stuff. And stuff is taxable. So the rule is simple. Selling UAE business is a taxable supply. You pay 5% VAT.
If you buy AED 20 million worth of equipment and inventory? Congratulations. That’s AED 1 million in VAT. That can blow your budget fast if you weren’t expecting it. But there’s a twist. Dubai’s VAT law has an out for this: the Transfer of a Going Concern (TOGC).
If you buy the business as a whole, so it can keep operating without interruption, the deal may qualify as VAT-free.
But this isn’t some rubber-stamp exemption. You have to hit the criteria:
- The business must keep running as a going concern.
- Both buyer and seller need to be VAT-registered.
- The Federal Tax Authority wants to see that you’re really transferring the business, not just cherry-picking assets.
Miss any of that, and you’re back to paying 5%. So which is cheaper? If you just want the company as it is, share deals win on VAT. Almost always. No VAT on the purchase price. Simple. Asset deals? Riskier. You might qualify for the going concern exemption. But you have to plan it carefully. Do it wrong and the 5% hits you.
Sometimes, you want the control of an asset deal. You can avoid liabilities you don’t like. You can just buy a business in parts that fit your requirements. But you can’t ignore VAT.
Here’s the truth.
The best structure depends on your goals. If you want simple, VAT-efficient, take-it-as-it-is? Share purchase. If you want to be selective? Asset purchase—but make sure you understand the VAT consequences. Because in Dubai, there’s no wiggle room. VAT is strict. The FTA doesn’t care about your intentions. They care about the letter of the law.
So don’t treat this like a box to tick at the end. Don’t let your lawyer bury it in the schedule of costs. Plan it from the start. Talk to your tax advisor before you sign anything. Make sure you know if your deal qualifies as a going concern. Because that 5% can be the difference between a good deal and a disaster.
VAT Impact on Asset Purchases
Let’s get real about asset purchases. They’re flexible, sure. You get to pick exactly what you want. Equipment. Stock. Vehicles. Property. Leave behind the debts and the mess.
But this freedom has a price tag—and it’s called VAT.
Pick What You Want — But Know the Cost
Let’s get real about asset purchases. They’re flexible, sure. You get to pick exactly what you want. Equipment. Stock. Vehicles. Property. Leave behind the debts and the mess. But this freedom has a price tag — and it’s called VAT.
Business Assets Are Taxable Supplies
In the UAE, selling business assets is a taxable supply. That means 5% VAT, nearly every time. It doesn’t matter if you’re buying a few computers or an entire warehouse full of goods. If you’re buying assets, expect to pay.
The Transfer of a Business as a Going Concern (TOGC)
But there’s a way out — if you do it right. The UAE’s VAT law has an important carve-out called the Transfer of a Business as a Going Concern (TOGC). This isn’t some loophole or sneaky trick. It’s a legitimate exemption, but the conditions are strict.
What Makes a Deal Qualify
For a deal to qualify as TOGC, you’re not just buying a bunch of assets. You’re buying a business in the UAE, the whole business, or at least a part of it that can keep operating on its own. The business must transfer in a way that it doesn’t stop trading. The buyer also needs to be VAT registered, ready to step in and keep it going without a break.
If all of that lines up, then VAT doesn’t apply to the transaction. No 5% on the asset price. It sounds good, and it is — if you meet those conditions. But if you’re only buying selected assets and leaving others behind, you might not qualify. The tax authority doesn’t care about your deal-making strategy. If it doesn’t look like a going concern, they’ll hit you with VAT.
Real Estate: A Special Note
Real estate complicates things even more. Commercial property sales in the UAE attract VAT by default. But buyers who are VAT-registered can usually recover that as input VAT later. It’s not free money. It’s a cash flow issue. You pay upfront, then reclaim it through your VAT return — if your business model supports that.
Plan Ahead and Document Everything
The bigger point is this: asset deals demand planning. You need to know if you’re buying a going concern or just assets. You need to document everything carefully. Otherwise, you’re looking at VAT on each piece of the deal, plus potential land or license transfer fees.
Share vs. Asset Purchase: VAT in Practice
When you boil it down, share deals are usually simpler. You buy the company itself. No VAT on the purchase price. The whole thing is treated as an exempt supply of financial services.
You still have to deal with regulatory filings or legal fees to update shareholding records, but the VAT side is clean.
Asset deals are messier. VAT hits most standard-rated assets unless you qualify for TOGC. Even then, you need to prove it. Document it. Report it. Make sure both sides are VAT registered. If you get it wrong, the FTA won’t forgive you.
Input VAT recovery is another angle. If you do pay VAT on assets, you might be able to recover it—if you’re VAT registered and making taxable supplies. That’s good news for cash-rich buyers. But it still affects cash flow. You pay first, claim later.
Even real estate has nuances. Shares in real estate-holding companies? VAT-exempt. But direct sales of commercial property? That’s standard-rated unless TOGC conditions are met.
What Buyers and Sellers Really Need to Know
If you want something simple, go for a share purchase. No VAT on the price. Less complexity. But you inherit everything—the good, the bad, the ugly.
If you want control? Asset purchase lets you choose. But VAT will be a factor unless it’s a going concern.
Don’t assume your deal qualifies as TOGC automatically. You’ll need clear evidence that the business keeps running without a break. Both parties need to be VAT registered. And the documentation has to be watertight.
Even the UAE’s free zones and mainland can have different interpretations. Designated zones have specific rules on supplies of goods and services that might impact whether your TOGC claim holds up. Cross-emirate transactions can add even more compliance work.
Making Sense of TOGC: The VAT Lifeline for Asset Purchases
Let’s talk about the one thing that can save you serious money if you’re buying business in Dubai: TOGC.
Transfer of a Business as a Going Concern isn’t just some dry tax term. It’s your way to keep the Federal Tax Authority from slapping 5% VAT on your entire deal.
But it’s not a free pass. The FTA wants proof you’re taking over a real business, not just cherry-picking bits you like. To get the VAT exemption, you have to tick all the boxes. The whole or an independent part of the business must move to you. You, the buyer, have to be VAT-registered in the UAE. And the business has to keep running without missing a beat.
That means you don’t just get the assets. You take on the staff, the contracts, the licenses. Everything needed to keep the doors open and customers served.
FTA wants to see that it’s genuinely a going concern. If you buy half the equipment and leave the rest, they’ll see right through it.
What Proves It’s a TOGC?
Don’t expect the tax authority to just take your word for it. They’ll want documentation.
You’ll need a clear, itemized list of what’s transferring. Every asset with a value attached. A signed sale agreement that says this deal is being treated as a TOGC.
Your VAT registration certificate has to be valid. You’ll need to show that the business won’t stop operating—often with a continuity or transition plan.
Transferring staff and customer contracts is also part of the deal. If you leave these behind, the FTA will see it as a simple asset sale, and the 5% VAT kicks in.
Real Examples: What Works, What Doesn’t
This isn’t just theory. Businesses in the UAE have done this successfully.
One real case: a company transferred an entire operating unit—leased premises, machinery, staff, and live customer contracts—to a VAT-registered buyer. The FTA agreed it was a going concern. No VAT on the deal.
But don’t think you can fudge it.
Look at the UK’s Haymarket Media case. They tried to claim TOGC, but the buyer planned to start new operations, not continue the old ones. The tax authority didn’t buy it. VAT was due.
The lesson? Continuity is everything.If you plan to shut it down and start fresh, don’t expect VAT relief.
The 2025 Landscape
If you’re planning a deal now, here’s the good news and the caution.
Share purchases remain VAT-exempt in the UAE as of 2025. That hasn’t changed. Buy the company outright, and there’s no VAT on the share price.
But asset purchases? The FTA is watching. Recent clarifications make it clear: TOGC relief is strict. Partial sales of assets almost never qualify.
And while you’re thinking about tax, remember that gains on share sales may still be subject to corporate tax. That’s a different beast from VAT. Don’t mix them up.
Getting It Right in Practice
If you want to avoid a costly VAT bill, you need to be smart. Do real VAT due diligence. Don’t just assume your deal qualifies as TOGC. Review your VAT registration, check what’s actually being transferred, and get the paperwork in order.
Structure the deal carefully. Engage experts who know how to get this right in the UAE context. The FTA is known for checking these details.
And document everything. Keep a clear record when you buy business in UAE, why it counts as a going concern, and how you’ll keep it running. If the FTA comes knocking, you want your evidence lined up.
How ADEPTS Helps
This is where firms like ADEPTS earn their keep. They don’t just tell you the law. They help you apply it to your deal. VAT due diligence, transaction structuring, compliance checks; they’re in the weeds making sure you don’t get caught out.
Because a 5% VAT bill on millions isn’t something you want to discover after you’ve signed.
The Bottom Line
Share purchases? Usually VAT-free. Asset purchases? Usually taxable at 5%, unless you qualify for TOGC. That’s the game. If you’re buying a business in Dubai, don’t just look at the price tag. Think about how the deal is structured, what VAT will do to it, and whether you’re genuinely buying a going concern.
A bit of planning now can save you a huge headache later. Talk to someone who knows the rules. Then make the smart move.
They assume the deal qualifies as a Transfer of a Going Concern without checking the conditions. Then they get hit with 5% VAT on the entire asset price because they didn’t transfer enough of the business to meet the test. Always do proper due diligence and document continuity.
Almost never. TOGC is about transferring the whole business or an independent part that can keep running on its own. If you’re just buying selected assets—like machinery, inventory, or vehicles—it’s a taxable supply and VAT applies.
Yes, they can. In designated zones, VAT grouping can change how supplies between entities are treated. It can help smooth out the VAT liability on internal transfers, but it doesn’t guarantee TOGC treatment. Always check the specific rules for your free zone and structure the deal carefully.
That usually kills TOGC status. Continuity is essential. The FTA wants to see the business move as a going concern with no break in trade. A pause in operations suggests you’re not really buying a running business, just assets—and that means VAT.
Keep it at least five years. The FTA has the right to review transactions well after the fact. You’ll want full records to prove you met the TOGC conditions if they ask.
Yes. Most professional services in the UAE are standard-rated at 5% VAT. Even if the main transaction is exempt or outside VAT scope, you’ll still pay VAT on these fees.
They watch these closely. Cross-emirate deals can involve extra compliance and registration checks. You’ll need to show that both buyer and seller are VAT-registered and that the business can continue without interruption. The documentation needs to be watertight.
References
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