Rethinking ‘Single Composite Supply’ under UAE VAT

Under Article 4 of the UAE VAT Executive Regulations, practitioners have traditionally assumed that if the prices of different parts of a transaction are shown separately in the contract or invoice, the transaction is automatically disqualified from being a Single Composite Supply (SCS) and is instead treated as multiple supplies.

A closer reading of Article 4(3) of the UAE VAT Executive Regulations suggests two distinct scenarios:

• Letter A – Components
  Multiple supplies linked together, where one is principal and others are ancillary. Article 4(4) explicitly states that no separate prices are allowed for SCS treatment.
• Letter B – Elements
  Parts so closely linked that it would be impossible or unnatural to split them. Here, no restriction on separate pricing is mentioned.

The practical takeaway from these provisions is that for each project, it is essential to identify whether we are dealing with:

• Multiple supplies with a principal component — in which case a single price is required for SCS treatment, or
• A single supply composed of multiple elements — where separate pricing of elements is not relevant.

This distinction will guide the VAT treatment from the outset.

Consider EPC (Engineering, Procurement and Construction) turnkey projects where part of the materials come from the UAE and part of the work is carried out in the UAE, but the installation and delivery of the fully operational asset take place outside the UAE. Commercially, costs are often split across design, procurement, construction, or assembly for budgeting or client visibility.

However, the true purpose is to deliver a fully operational asset. Separating the cost components of these projects to treat them as separate supplies is neither natural nor economically meaningful.

In practice:

• If treated as multiple supplies: the local supply of materials and local work (e.g. assembly) could attract UAE VAT — a non-recoverable cost for a foreign client.
• If treated under Letter B – Elements: the project can be seen as a single, inseparable supply, with the place of supply at the final installation and delivery — outside UAE VAT scope. This can help avoid unnecessary VAT costs.

In ECJ Stadion Amsterdam (C-463/16), the court confirmed that even if each element’s price can be identified, this “has no decisive significance” if, in substance, the transaction is a single supply. This strongly supports the view that separate pricing does not automatically lead to multiple supplies in cases like Letter B.

While not free from debate, this interpretation offers a strong and defensible basis for treating certain complex projects as a Single Composite Supply — even when prices or costs are identified separately.

• If the law itself describes separation of elements as “impossible or unnatural,” should VAT treatment ever split them apart?
• Why does the legislator require a single price for Components (Letter A) but not for Elements (Letter B)?