1. VAT Awareness & Readiness
VAT SME Event
VAT Awareness & Readiness
September 2017
Strictly private and confidential

2. Outline 1 2 3 4 5 Recent VAT Developments VAT Laws in UAE
Update on latest developments on VAT in the GCC 1 2
Understand the general principles of VAT in UAE
VAT Laws in UAE
Understand the VAT registration and compliance requirements
VAT Compliance 3
Focus on VAT impact for businesses 4
VAT Impact
Key issues 5
Implementation Challenges
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3. Recent VAT Developments1
Recent VAT Developments

4. Recent VAT Developments
A common VAT framework
GCC Member States agreed on a common VAT framework (treaty)
Tax Authorities and VAT legislation
KSA has released the GCC VAT Framework, Draft VAT law and Draft Implementing Regulation
UAE has also released the GCC VAT Framework
UAE has released VAT Tax Procedures Law and Excise Tax Procedures Law
UAE Federal Tax Authorities (FTA) initiated Advanced Registration Pilot (ARP) for VAT
UAE FTA has launched their web site recently Registrations for business is expected to be opened in end of September
UAE Implementing Regulations are expected soon
Go live
The introduction of VAT in the GCC is expected to take effect from 1 January 2018
We expect that companies may start to register for VAT in the UAE from October 2017
Merge Tax authorities and VAT legislation points 2 & 3
Include point for UAE law, etc
Remove VAT regulations
Write about ARP
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5. 1 2
VAT system in the UAE

6. What is VAT? Value Added Tax (“VAT”) is a tax on consumption.
Transaction based tax - VAT is levied on each transaction throughout the supply chain
VAT charged on supplies (output tax) and VAT deducted on purchases (input tax)
Collected by VAT registered businesses on behalf of the Tax Administration
Self-assessment system - businesses submit a periodic return to the Tax Administration. Net VAT will be either payable or refundable
A quick view on the main features of the VAT.
Write about compliance
Compliance before self-assessment
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7. Our Understanding of the GCC VAT System
Standard rate 5%
VAT at import
Minimum annual turnover
VAT on goods & services
Possible VAT exemptions
Exports subject to 0%
Deduction of input VAT
Periodical filing and reporting
Envisaged system is a standard, fully- fledged VAT system, with VAT applying on most supplies of goods and services with possible exemptions/exceptions
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8. VAT Treatments Standard Rate Exempt supplies Zero Rate Out of Scope
Sale / lease of commercial use properties, construction services
Utilities
Most other goods and services not specifically exempt or zero-rated
Subject to VAT at 5%
Input tax is deductible
Standard Rate
Sale / lease of residential property (except for first supply)
Local passenger transport
Bare Land
Some financial services
Life Insurance
No VAT charged
Input tax not deductible
Exempt supplies
Export of supplies outside GCC
International transport services, Education, Healthcare etc. within UAE
New residential buildings / Newly converted residential buildings
Subject to VAT at 0%
Input tax is deductible
Zero Rate
Accounting adjustments (like depreciation, amortization, etc.)
Wages and salaries, allowances, bonuses
Dividends
Statutory fee
Outside the scope of the UAE VAT law
Out of Scope
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9. Raw Materials sold to Manufacturer 100 + 5 VAT
How VAT works
Manufacturer
Producer
5+5+5 =15
xxx
Retailer
Remit = 5
Raw Materials sold to Manufacturer VAT
Product
sold to retailer
VAT
Remit 5
Remit = 5
Product
sold to consumer
VAT
Government Revenue
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10. Transaction Flow u u
GCC
(Intra-GCC Supplies)
Outside GCC
(Export & Import)
UAE
Customer
VAT
Goods &
services
Supplier
VAT
RCM
Goods &
services
Company A
No VAT
Customer
Supplier
Goods &
services
VAT
RCM
Goods &
services
No VAT
Customer
VAT
Customs duty & VAT
Goods &
services
Goods &
services
Local Supplier
Local Supplier
Outside FTZ
Within FTZ
How is the competition placed? Should we plan promotions like “ Buy VAT free” for the initial period?
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Al Naboodah Group - VAT Awareness Training

11. 1 3
VAT Compliance

12. Compliance Requirements
VAT Invoices
Intercompany
Transactions
Record
Keeping
VAT Return
VAT
Deductions
&
Refunds
VAT Groups
Only VAT registrants should issue VAT invoices
Specific content of a valid VAT invoice
Timeline for issuance
Documentary evidence for input VAT deduction entitlement
All intercompany transactions are subject to VAT
Each entity must issue tax invoice for each transaction
Each entity will file its own VAT return
Require IT system able to collate data from each entity in the group
Chances of errors occurring are higher
Minimum period (5 to 6 years)
Hard copy or electronic
Able to be reproduced for Audit in Arabic
Retention for 0% or exempt supplies
VAT grouping are allowed formed in order to have an ease in VAT compliance for groups
However, accessing who can form a group, pros and cons is of utmost importance
Periodic basis
Report all supplies and purchases
Calculate net tax (for payment/refund)
Reporting of supplies (revenues) at Emirates level
The taxable person registered for VAT purposes can deduct input VAT paid on his purchases/expenses from the VAT due on his supplies to the tax authorities
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13. VAT Groups
General conditions to be met by each member of a VAT group in a country
UAE VAT Group D A B C
No VAT
Sales + VAT
Legally independent entity in the UAE
Legally independent but closely bound to the other members by financial, economic and organisational links
Engaged in a business providing economic activity
Not a member of another VAT group
Bounded by financial, economic and organizational links
Effect: Entities within the group are treated as one entity for VAT purposes
Results: Intra-group supplies are disregarded for VAT purposes
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14. VAT Registration Criteria Process Documents Needed
1. Persons operating in a business, not a business itself
2. Person can be individual or a legal entity. No separate VAT registration for branches
3. Taxable supplies exceeds AED 375,000 in last 12 months - MANDATORY
4. Turnover or expenses exceeds AED 187,500 in last 12 months - VOLUNTARY
Criteria
1. FTA initiated pilot registration program, closed last week – Voluntary registration
2. Create e-services account with the FTA on
3. Mandatory Registrations are expected to open from October 2017
4. Easy registration on e-services portal using e-services account login id
5. No requirement of filing physical documentation
Process
Documents identifying the authorized signatory (passport copy, Emirates ID etc.)
Power of attorney in the name of authorized signatory authorizing to represent company before FTA
Trade license & other company documents such as articles of association etc.
Financial details for last 12 months and many more
Documents Needed
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15. Focus on VAT impact for businesses
1 4
Focus on VAT impact for businesses

16. VAT is just not a tax reform… it’s a Business reform!
Finance
Impact on cash flow
Identification of business transactions and VAT liability
Pricing
Impact on pricing structures (Residential, Commercial, Industrial)
ECRA guideline
Information Technology
System changes for VAT compliance
Tax coding structures (material, location)
Compliance
Registration and compliance processes
VAT
Implications xx
Human Capital
Roles and responsibilities
Centre of Excellence
Procurement
VAT payments on purchases
Vendor management
Supplier VAT Codes
Material VAT Control Codes
Business efficiency
Cash flow management
Credit policies
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17. 5
Challenges

18. Key activities for Business
Go Live
A detailed transition plan will be prepared where cross functional teams will be involved to factor in multiple changes
Sales
Procurement HR
Finance IT
Legal
Revision of Sales Price
Customer communications
Renegotiating customer contracts
Revision of Purchase Price
Vendor communications
Renegotiating vendor contracts
Training to employees
Analyse perquisites given to employees
Understand any gifts etc.
Reassess cash flow requirement
Reassess working capital
Finalizing formats for invoices etc.
Assess Credit admissibility
Obtain registration
Upgrading IT systems
Installing new IT software
Amend in-built logics in IT system
Do test runs
Re-drafting/ validation of contracts
Re-negotiating contracts
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19. Challenges Do you have the appropriate resources to be compliant
Who will be responsible
Do you understand the new law/regulations
How do you keep up to date with changes
VAT Implementation
Transitional VAT issues – existing and future contracts
Understand tax planning and fraudulent VAT practices
Test drive overall VAT supply chain before going live
Manage increased administrative costs
Manage cash flow, understand possible P&L impact
Manage change
Seeking ruling, clarifications on unclear matters/processes
Registration and compliance related assistance
Ongoing interactions for refunds/enquiries/audits
Interaction with tax authorities
Communication
Educate and train stakeholders internal and external
Interview sessions with all key stakeholders
Compile information through standard VAT templates
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20. Time is running! Are you Ready?
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