For the first time, Tax on Goods & Services has been introduced in Gulf Countries and out of 6 GCC States, UAE & Kingdom of Soudi Arabia has already implemented VAT on supply of Goods or Services through out the Supply Chain w.e.f. 01st Jan, 2018. In this presentation, I have tried to explain the need & basis of Implementation of VAT in UAE, Taxable Transaction, Types of Supplies, Exports, VAT on Transactions between GCC states. Will bring more about UAE VAT in my next presentation. Please share your feedback in the comments section. Thanks

1. Private & Confidential 1
Introduction to
Value Added Tax
Implemented in
United Arabs Emirates (UAE)
w.e.f. 01st January, 2018

2. Introduction of VAT in UAE VAT Structure Taxable Person
Taxable Transaction Types of Supplies Exports
Reverse Charge Provisions
Business Transactions with
GCC States
Supply to / from
Designated Zones
CONTENTS
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3. Introduction of VAT in UAE
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The Gulf Cooperation Council (GCC) member states signed a framework agreement to introduce Value-
Added Tax (VAT) leads to paradigm shift from No Tax Economy to 5% Tax on supply of goods & services.
Though VAT will have implications
on the businesses as the tax shall
be paid on value added at each
stage. However, a broad based VAT
at low rate is unlikely to effect
investment in the surrounding
region as it will have neutral
impact on the registered
businesses.
Falling revenues from oil banks
& Continuous deficit in GDP of
GCC states forced these states
to adopt certain reforms like
VAT so as to fund the Govt.
expenditure in this region. IMF
estimates suggest that this
could raise as much as 1.5% -
2% of GDP across the region.
Kingdom of Saudi Arabia (KSA) & United Arab Emirates (UAE) has implemented VAT w.e.f. 01st Jan, 2018
while other GCC member states will implement it in between 2018 and 2019. Each member will issue its
VAT Law in line with the common principles outlined in the GCC treaty.

4. GCC VAT is based on the VAT currently in place in 28 member states of Europe Union (EU) & in line with
the guidelines of OECD with few modifications.
Value Added Tax is a tax which is levied at every stage of the supply chain but only on the value added at
each stage as it allows complete set-off of the Tax paid on previous stage.
Benefits & Features of UAE VAT
VAT paid is available as Input
credit on all items except few.
No cascading effect.
Uniform VAT rate i.e. 5% on all taxable
goods & services throughout GCC states.
VAT paid in one GCC state is available as
Credit in other GCC state to registered
business.
Non compliance will attract
hefty penalties.
VAT Structure
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5. Private & Confidential 5
VAT Structure
How VAT works on supply of goods is explained in the below example:
Supply Goods for
10,000 AED & charge
VAT AED 500
Supply Goods for
12,000 AED & charge
VAT AED 600
Registered Dealer ConsumersRegistered Manufacturer
He will deposit VAT of AED
500 to Govt. assuming that he
has no Input Tax on its
purchases.
He will deposit VAT of AED 100
to Govt. since AED 500 paid on
purchases will be deducted
from VAT liability on his supply.
It means Tax is levied only on
Value added by him i.e. 2,000
Ultimate Cost of
VAT is bourn by
Consumers being
the last stage of
Supply Chain

6. GCC States have chosen the Consumption Based Model for implementing VAT in their region based on this model,
state where goods or services are consumed shall receive the tax revenue. Following can be the major categories of
supply which falls under the ambit of VAT Law:
VAT Structure
Supply within UAE
ValueAddedTax(VAT)
• Tax @ 5% will be
levied on supply of all
goods & services
within UAE including
deemed supplies
except those
categorized as Zero
Rated or Exempted
Supplies.
ExportbutTaxable
• Supply of Goods or
Services from UAE to
other Implementing
State will be termed as
Export but not Zero
Rated. Such supply
shall attract VAT and
importer shall get
input of VAT paid in the
other implementing
state.
Import&Export
• Any inward or
outward supply from a
place located outside
GCC state shall be
treated as Import &
Export. Exports shall
be Zero Rated while
Imports will attract
Custom Duty & VAT.
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Supply in/out side GCC StateSupply outside UAE within GCC

7. Taxable Person
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Every registered person & person liable to get itself registered are Taxable Person. Following person
shall register itself under VAT:
Mandatory
Registration
• A person who has place of residence in UAE or other Implementing State shall register if
• its total Value of Supplies in UAE exceeds AED 375,000 in previous 12 months or
• it is anticipated that the value may exceed such amount in next 30 days.
• A Non-resident shall register itself without any threshold for supplies other than reverse charge.
Voluntary
Registration
• A person who is not obligated to register itself may voluntarily apply for it:
• If its total Value of Supplies or Taxable Expenses exceeds AED 187,500 in previous 12 months
or
• If it is anticipated that value of supplies will exceed such amount in next 30 days.
Tax Groups
• Two or more Related Persons may apply for registration as Tax Group if
• Each of them has place of establishment in the State
• One or more person conducting business in partnership shall control the others.
• Only a Legal Person can be part of Tax Group & Value of Supplies exceeds AED 375,000

8. Taxable Person
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 The value of Taxable Goods and Services.
 The value of Imported Goods and Services which are taxable in UAE if
supplied within the state.
 The value of Taxable Supplies that belong to a Person if he has
acquired a Business from another Person who made the supplies.
 The value of Taxable Supplies made by Related Parties if not
registered as Tax Group.
Following values to be
included for computing
Threshold Limit for
Registration
1. Value includes monetary & non-monetary consideration
2. Supply of Capital Assets & Exempted supply by a Person shall not be considered for computing Threshold Limit
Following persons shall be
considered as Related
Persons
 One person holding voting interest, market value interest of 50% or
more or control over each of the legal person;
 Two or more Persons who are not separated on the economic,
financial or regulatory level, where one can control the others either
by Law, or through the acquisition of shares or voting rights.

9. Private & Confidential 9
Supply
For
Consideration
(Monetary or
otherwise)
In course of
furtherance
of Business
Conducted
in UAE
By a
Taxable
Person to
another
Essential Elements of a Taxable
Transaction under VAT
Taxable Transactions
There are few
exceptions to these
elements which shall
fall in the meaning
of Deemed Supply

10. Taxable Transactions
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Transactions which are chargeable to VAT:
• Supply of Goods or Services for a Consideration by a Person conducting
Business in the State, and does not include Exempt Supply.
Taxable
Supply
• Certain transactions which do not qualify as Taxable Supply but shall be
considered (deemed) as taxable for the purpose of levying VAT.
Deemed
Supply
• Goods or services imported in UAE from outside the GCC states which
would be taxable if supplied within UAE.
Import of
Goods or
Services
Deemed Supplies may be considered as taxable even if it do not involve two persons or no
consideration is paid or not in the course of Business.

11. Following transactions shall be considered as Deemed Supply and VAT shall be levied
even if it does not involve basic elements of a Taxable Supply:
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Supply of business assets of a
Taxable Person without
Consideration by way of change
in the intended use of such
assets.
Stock Transfer of business assets
in case of Intra GCC supply except
if it is a temporary transfers or
made as part of other taxable
supply
Value of Goods or Services
procured for business & Input
tax was recovered but used
other than for business purposes
Goods and Services that a Taxable
Person owns at the date of Tax
Deregistration
Taxable Transactions
No VAT Input was
recovered or
Supply is Exempt
If Input Tax
recovered has been
adjusted in
pursuant to Capital
Asset Scheme
Samples or Gifts for
a value upto AED
500 to each
recipient in last 12
months
Output Tax on
Deemed Supply to
each recipient is up
to AED 2,000 in last
12 months
No Deemed
Supply in
following cases

12. Types of Supplies
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Supply of Goods
Transfer of ownership of the Goods or
transfer of the right to use them as
owner.
Goods transferred under Compulsory
Acquisition or Hire Purchase Agreement
Supply of Water, Energy in all forms,
Real Estate including tenancy contract
are supplied as Goods.
Supply by way of Stock Transfer,
Storage loss, Transport loss, Trial
Stock, Disposal of goods are not
considered as Supply of Goods
Supply of Services
A supply that is not considered as
supply of Goods is Supply of Service.
Making available a facility, agree to
perform or not to perform an activity
is Service.
Transfer of right to use any goods with
no ownership or Transfer of Indivisible
share in Goods, Intangible rights is
Service.
Though classification of
goods & services has no
significance in UAE VAT.
However, certain
provisions like Place of
Supply have different
rules for Goods &
Services which makes it
pertinent to understand
the classification.

13. Types of Supplies
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Standard Rate Supply
All taxable supplies are charged with the VAT at Standard Rate i.e. 5% except those listed as 0%.
Examples: Stationary, Electronic Equipment, Uniforms, Jewellery, Insurance, Food & Beverage etc
Zero Rated Supply
A supply on which VAT is levied @ 0%, however, supplier is entitled to claim Input Tax paid on
goods or services procured for making output supplies. It includes Exports outside GCC states.
Examples: Preventive Healthcare services, Crude Oil & Natural Gas, Nursery or Pre Education etc.
Exempted Supply
A supply of goods or services for consideration where no tax is due & no input tax is recoverable
Examples: Domestic Passenger Transport, Bare Land, Issue of Equity or Debt Security etc.

14. Types of Supplies
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• Supply of a Principal Component along with a component which are necessary or
essential to the making of supply including incidental elements.
• Supply which has two or more elements so closely linked that it would be
unnatural or impossible to split.
• Supply under a contract where price is not separately charged or identified and all
components are supplied by single supplier .
Single
Composite
Supply
• Two or more component i.e. goods or services are supplied for a single price and
such supply does not constitute a single composite supply.
Multiple
Supplies
Supplies of Two or more Goods or Services for a single price:

15. Types of Supplies
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Supplies by
Agent
Agent supply goods in
Principal’s Name* – VAT
obligations on supply of goods
to be performed by Principal
Agent supply goods in his own
Name# – VAT obligations on
supply of goods to be
performed by Agent.
Supply by Govt. Entity
to be considered in
the course of business
If its activities are conducted
in a non-sovereign Capacity or
in Competition with the
private sector.
Cabinet Decision shall be
issued at the suggestion of the
Minister for determining the
nature of supply by such entity
* Commission earned by Agent from Principal shall be taxed as Supply of Service.
#In this case commission earned by Agent will be considered as included in Supply of Goods.

16. Exports
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Goods departing UAE or Services provided to a person whose place of establishment or fixed
establishment is outside the State shall be treated as Export. Types of Export in VAT:
• Supply of goods outside the Implementing States & supplier is responsible to transport
the goods or may appoint an agent to do so
• Zero Rated - If goods are physically exported or put into a customs suspension regime
within 90 days of supply and its official evidence is retained by exporter.
Direct
Export
• Supply of goods outside the Implementing States & customer is responsible to transport
the goods or may appoint an agent to do so.
• Zero Rated - If goods are physically exported or put into a customs suspension regime
within 90 days of supply under an arrangement between supplier & receiver and its
official evidence is retained by customer. Secondly, Goods shall not be used till exported
or suspension and not leave the state with a passenger or crew member.
Indirect
Export
• Zero Rated – (1) If Service Receiver has no place of residence in an Implementing State
and who is outside State when services are performed;
• (2) If services are not directly in connection with real estate or moveable personal asset
located in State, services are actually performed outside implementing states, if services
consist of outbound tour packages.
Export of
Services

17.  Under provisions of Reverse Charge, liability to pay VAT has been shifted wholly from supplier to receiver.
These provisions shall apply in following cases:
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Reverse Charge Provisions
• By Registrant to Registrant in a State for Resale or Use in distribution of any form of
Energy. Except in given situations:
• Before date of Supply, Receiver do not confirm to Supplier in writing that he is
acquiring these goods for resale or that he is a registrant which must be verified by
supplier through an approved by Authority;
• If supply of such goods is taxable @ 0% or supply is made along with other goods.
Supply of Crude
or Refined Oil,
Gas or other
Hydrocarbon
• Import of Concerned Goods or Services by Taxable Person for his business;
• Receiver of such supplies shall be deemed to be Supplier & shall perform all tax
obligations for such supplies.
Import from
outside GCC
Concerned Goods or Services means Goods or Services that have been imported in a State which would not
be exempt if supplied in the state.

18. Business Transactions with GCC States
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Registration in UAE by
supplier of other
Implementing State
Export from UAE to other
Implementing States
If Goods are received from other Implementing State by an
unregistered person in UAE and value of all supplies by such supplier
to UAE exceeds AED 375,000 then registration is mandatory.
Goods exported from UAE to any person in implementing states will
be treated as Export but it will not be eligible for Zero Rated Supply
and will be taxed at Standard Rate.
Tax paid on purchases
from Implementing State
Any VAT paid by the Importer on its import of goods into UAE from
other Implementing State shall be available as Input Tax in UAE.
Importer shall keep evidence of such payment & shall not avail such
Input Tax in any other implementing state.
Person importing goods in UAE from outside GCC state shall pay VAT
under reverse charge but Input Credit of the same can be claimed from
the Implementing State where such goods are exported & not from UAE.
Goods Imported in UAE &
exported to other
Implementing State

19. Supply to / from Designated Zones
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 Designated Zones (DZ) is a specific fenced geographic area and has security measures and Customs
controls in place to monitor entry and exit as designated by a UAE Cabinet decision (at the
recommendation of the UAE Minister of Finance). The existing UAE’s Free Zones need not necessarily
be considered as Designated Zones.
VAT Chargeability on inward & outward supplies of Designated Zone:
Supply between Designated Zones
No VAT applicable on such supply if Supplied Goods or parts thereof are not used or altered in any way
during transfer and it is in accordance with GCC Common Customs Law.
Services or Water or any form of energy supplied to Designated Zone
Place of Supply of such supply shall be considered as made within the State and the same shall be taxed
in accordance with the law.
Import of Goods by Designated Zone from State or Outside State
Goods imported from outside State into a DZ shall not be chargeable to VAT while Goods supplied to a DZ
shall not be considered as Export from a place in the State and thus taxable.

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For any query or information, feel free to contact us
at:
Ashish Gupta, CA
BizExpert Advisors LLP
P: +91-9891670570
E: business@bizexpert.co.in
W: www.bizexpert.co.in
Check out the Part – II for more about UAE VAT Law