What is VAT ? What is covered under VAT ? At what rate to charge for which Items ? When to charge ? When to pay ? What happens to sales returns and Bad Debts ? What records to keep and how long to keep ? When, how and with what information to file returns ? What are the penalties for non-compliance ?

1. CA Velu Arumugam
CA Balaram Reddy
Spectrum Auditing & Accounting
Value Added Tax (UAE)

2. Questions
• Transaction related
• What is VAT ?
• What is covered under VAT ?
• At what rate to charge for which Items ?
• When to charge ?
• When to pay ?
• What happens to sales returns and Bad Debts ?
• What records to keep and how long to keep ?
• When, how and with what information to file
returns ?
• What are the penalties for non-compliance ?

3. UAE VAT – in a nut shell

4. Introduction
Value Added Tax (VAT) in some countries is also called as
Goods and Service Tax (GST).
GCC countries mutually came out with Unified VAT Framework to
implement from 1 Jan 2019, however with an option to start on 1 Jan
2018.
VAT shall be levied on import and supply of goods and services
on the value added at each stage of supply chain.
Entire tax to be borne by the end user.

5. FLOW OF VAT
Business charges VAT on sales
(Output Tax)
Business pays VAT on purchases
(Input Tax)
Net VAT/ Due Tax
(Output Tax - Input Tax)
Payable to VAT
Administration
Refundable/Carry
forward by VAT
Administration
Less
Equals
Positive Negative

6. VAT ILLUSTRATION
Manufacturer Whole seller Retailer Consumer
Tax invoice (A)
Sale value = AED 100
VAT (O/T) = AED 5
Invoice Amt AED 105
Tax invoice (B)
Sale value = AED 150
VAT (O/T) = AED 7.5
Invoice Amt AED 157.5
Tax invoice (C)
Sale value = AED 200
VAT (O/T) = AED 10
Invoice Amt AED 210
VAT = AED 5
VAT = AED 7.5
ITC = (AED 5)
AED 2.5
VAT = AED 10
ITC = (AED7.5)
AED 2.5
VAT = AED 10
(AED 5 + AED 2.5 + AED 2.5)

7. Scope of Tax

8. Scope of Tax
Scope of Tax
Taxable Supply
Exempted Supply
Goods & Services
Consideration
Business
In the State
Import
Goods from abroad into
the State
Services from outside
the State

9. Date of Supply

10. Date of supply
Date of supply is earliest of the following:
• Date of when goods are delivered/ assembled or services are
performed
• Date of Tax invoice
• Date of payment (part or full)
How to determine the date of supply?
Why is date of supply important?
Date of supply is the date that triggers the tax liability
The date of supply of Goods or Services for any contract that includes periodic payments or
consecutive invoices is the earliest of any of the following dates (not beyond 1 year from date of
supply) :
a. The date of issuance of any Tax Invoice.
b. The date payment is due as shown on the Tax Invoice.
c. The date of receipt of payment.

11. Date of supply - Example
12 Feb 18
Customer Orders Goods
Sales Order Accepted
28 Mar 18
Goods Delivered
Delivery Note Made
04 April 18
Tax Invoice Issued to Customer
Revenue Booking through Sales
15 July 18
Customer Pays Full Payment
Receipt Accounted
Determine the
date of supply

12. Place of Supply

13. Place of supply
If the place of supply of a transaction is outside UAE – no UAE VAT
If the place of supply of a transaction is within UAE – UAE VAT may be charged
Location of the goods at the time of supplyBasic rule
Place of supply of Goods
United Arab EmiratesExport (o/s IS)
Supplier’s place of residenceBasic rule
Place of supply of Services
There are certain exceptions to above rules
Why is it important to determine the place of supply?

14. Place of supply - Determine
Company X in UAE acquires services from Company Y in India
Determine the place of supply (UAE/ Outside UAE) for following transactions:
UAE
Mr. B in UAE acquires services from Company Z in IndiaIndia
Moon LLC in Dubai sells computers to Sun LLC in Abu DhabiUAE
Company A in Dubai sells computers to Company B in UKUAE

15. Categories of Supplies

16. Categories of Goods and Services in VAT
Supplies (Goods or Services)
Standard VAT rate
5%
Zero rate
0%
Exempted Supplies
Can avail
Input tax credit
No Tax &
No input tax
credit
Taxable Supplies

17. Supplies - Zero Rate
Educational services (School Fees & Books)
Preventive and basic healthcare
The first supply of residential buildings within 3 years of its completion
First supply of buildings – Charities & Converted buildings
Export to outside the Implementing State
International transport & ancillary services
Air, sea and land means of transport & repairs
Investment precious metals
Crude oil and natural gas

18. Supplies - Exempted
Financial Services (Lending, Deposit-taking, Life Insurance, Trading in shares,
Bonds, Derivatives, Foreign Exchange)
Residential buildings other than Zero rated (> 6m & Emirates ID)
Bare land
Local passenger transport
 Supplies made outside UAE
 Govt. Supplies (yet to be determined)
 Supplies by Unregistered members & individuals
Out of scope transactions

19. Residential property supply (recap)
Residential Buildings
Zero Rated supply:
- The first supply of residential buildings
within 3 years of its completion
- First supply of buildings – Charities
- First supply of buildings - Converted to
residential
Exempted supply:
- Rest all supplies

20. Recoverable Input Tax

21. Recoverable Input Tax
What is Recoverable Input Tax?
Input Tax paid for Goods and Services which are used or intended to be
used for making:
- Taxable supplies,
- Supplies that are made outside the State
- Others (certain financial services, Input Tax paid in Implementing state & first supply of
residential building even if it on lease)
What is non-recoverable input tax?
• Input tax which is attributable to Exempted Supplies
• Entertainment expenses to other than employees
• Motor vehicles that are available for personal use
• Goods or Services purchased to be used by employees for no charge
(except it is legal obligation or contractual obligation and normal business practice)

22. Recoverable Input Tax (cont’d)
Conditions to deduct Recoverable Input Tax?
The Taxable Person;
- Receives and keeps the Tax Invoice as per the provisions
- Pays the Consideration for the Supply or any part thereof (or intends to
make the payment before the expiration of six months after the agreed date for the
payment)

23. Reverse Charge

24. Shifts the place of supply and responsibility to account for VAT from the seller
to the buyer
Reverse charge on imported goods / services is required, where UAE
business is registered for VAT
Should not be a cost to a business that makes taxable (5% or 0%) supplies as
VAT is reported and recovered on same VAT return
Reverse Charge - Imports
Reverse charge should be calculated on the landing cost (including Insurance,
Freight, Customs & Excise Tax)

25. Reverse Charge - Example
Local purchase and sale
Purchase
Price (Ex VAT) AED 200
VAT (Input Tax) AED 10
Invoice Amt AED 210
Sales
Price (Ex VAT) AED 300
VAT (Output Tax) AED 15
Invoice Amt AED 315
VAT Return File
Output Tax collected AED 15
Less: Input Tax Credit AED (10)
Net Due Tax to FTA AED (5)
Net Impact on business Nil
Import and local sale
Import
Landed cost (Ex VAT) AED 200
Import VAT (Populates in Return) AED 10
Sales
Price (Ex VAT) AED 300
VAT (Output Tax) AED 15
Invoice Amt AED 315
VAT Return File
Output Tax AED 15
Import VAT (Populates in Return) AED 10
Less: Input Tax Credit AED (10)
Net Due Tax to FTA AED 15
Net Impact on business Nil

26. VAT Registration
Annual Turnover
(exclude Exempted supply)
Below AED 187,500 Between AED 187,500 -
375,000
Above AED 375,000
Need not to register Voluntary register Compulsory Register
Tax Group

27. Designated Zones

28. Designated Zones
Any Zone specified by the Cabinet as Designated Zone subject to following
conditions:
• Fenced geographic area with security measures and Customs controls
• Have internal procedures regarding the method of keeping, storing and
processing of Goods
• Designated Zone comply with the procedures set by the Authority
Designated Zone shall be treated as being outside the State & the
Implementing States

29. Emirates Name of the Zone
Abu Dhabi Free Trade Zone of Khalifa Port
Abu Dhabi Airport Free Zone
Khalifa Industrial Zone
Dubai Jebel Ali Free Zone (North-South)
Dubai Cars and Automotive Zone (DUCAMZ)
Dubai Textile City
Free Zone Area in Al Quoz
Free Zone Area in Al Qusais
Dubai Aviation City
Dubai Airport Free Zone
Sharjah Hamriyah Free Zone
Sharjah Airport International Free Zone
Ajman Ajman Free Zone
Umm Al Quwain Umm Al Quwain Free Trade Zone in Ahmed Bin Rashid Port
Umm Al Quwain Free Trade Zone on Sheikh Monhammed Bin Zayed Road
Ras Al Khaimah RAK Free Trade Zone
RAK Maritime City Free Zone
RAK Airport Free Zone
Fujairah Fujairah Free Zone
FOIZ (Fujairah Oil Industry Zone)
List of Designated Zones

30. Supply Nature Transaction Nature VAT Applicability
Services
DZ to DZ Vat @ 5%
DZ to Mainland Vat @ 5%
DZ to O/S UAE Out of scope
Goods
DZ to DZ * Out of scope
DZ to Mainland ** VAT @ 5% RCM
DZ to O/S UAE Out of scope
* If the goods are used for own consumption then RCM @ 5% will be applicable
** If the supply is to a non-registered person then VAT @ 5% will be Charged
Sales (Outward supplies) by DZ Company

31. Purchases (Inward supplies) by DZ Company
Supply Nature Transaction Nature VAT Applicability
Services
DZ to DZ Vat @ 5%
Mainland to DZ Vat @ 5%
O/S UAE to DZ VAT @ 5% RCM
Goods
DZ to DZ * Out of scope
Mainland to DZ VAT @ 5%
O/S UAE to DZ Out of scope
* If the goods are used for own consumption then RCM @ 5% will be applicable

32. Provisions on Compliance

33. Tax Invoice
• Tax Invoice – Must be in following Prescribed format:
• ‘Tax Invoice’ clearly displayed
• Name, address and TRN of supplier
• Name, address and TRN of recipient (if recipient is also registered for VAT)
• Sequential Tax Invoice number, or a unique number which enables
identification of the Tax Invoice and the order of the Tax Invoice in any
sequence of invoices
• Date of issuance & Date of supply (if different from date of issuance)
• Description of goods or services supplied
• The unit price, quantity or volume, rate of tax and amount payable
expressed in AED for each good or service
• The amount of discount offered
• Tax amount payable expressed in AED together with rate of exchange
applied
 Tax Credit Notes
 Tax invoice shall be issued within 14 days from date of supply

34. Simplified Tax Invoice & Record keeping
Tax Invoice – Must be in following Prescribed format:
• ‘Tax Invoice’ clearly displayed
• Name, address and TRN of supplier
• Date of issuance of Tax invoice
• Description of goods or services supplied
• The total Consideration and the Tax amount charged.
Instances when a simplified Tax Invoice can be issued, where the:
 Customer/ Client is not a Registrant
 Customer/ Client is a Registrant and the Consideration for the supply does
not exceed AED 10,000
• Record Keeping – Mandatory for minimum of 5 years
• Capital Goods Purchase – Mandatory for minimum of 10 years
• Real estate related - Mandatory for minimum of 15 years
• Bad debts, Sales returns

35. Record keeping & Audit
• Records keeping
• Records of all supplies and Imports of Goods and Services.
• All Tax Invoices and alternative documents related to purchases.
• All Tax Credit Notes on purchases.
• All Tax Invoices and alternative documents for sales.
• All Tax Credit Notes and alternative documents on sales.
• Records of disposed Goods and Services or used for matters not
related to Business
• Records of exported Goods and Services.
• Records of adjustments or corrections made to accounts or Tax
Invoices.
• A Tax Record (Due tax, recoverable tax along with errors & corrections)
• Audit
• Notify / Turn-up by Judicial Officers
• Legally mandated to provide records / samples etc.
• Audited Result can be appealed to FTA and later Litigation in Courts

36. VAT Returns

37. VAT Returns - Basic
• First return could be 1/2/3 months as specified by FTA
• Tax period - Monthly/ Quarterly/ longer
• Within 28 days after the end of the Tax period
• Due tax shall be paid before the due date

38. VAT Returns - Fields

39. VAT Returns – Standard rated supplies
¡
Amount(AED) ¡ VAT Amt(AED) ¡ Adjustment(AED)
1a Standard rated supplies in Abu Dhabi*
1b Standard rated supplies in Dubai*
1c Standard rated supplies in Sharjah* ¡
1d Standard rated supplies in Ajman*
1e Standard rated supplies in Umm Al Quwain*
1f Standard rated supplies in Ras Al Khaimah*
1g Standard rated supplies in Fujairah*
Include:
• The supply of goods and services subject to VAT at 5%
• Supplies of goods and services at a discounted rate(after deducting the
discount value)
• Deposits received as part payment
• Inter-company sales (not part of Tax Group)
• The sale of business assets
• Deemed supplies, (above limits)
• Reimbursements of expenses from customers
• Sales under the profit margin scheme
• Supplies of goods located within Designated Zones (DZ) where the goods
are consumed within DZ
• Reductions in value due to credit notes issued; or Errors that are allowed
to correct for previous Tax Periods.
Exclude:
• Sales of goods located within DZ
which are not consumed within
the DZ
• Out of scope supplies
• Zero-rated supplies
• Disbursements.
Adjustments:
• Claims for VAT bad debt relief
• Sales of taxable commercial
property in the UAE

40. VAT Returns - Imports
Amount(AED) ¡ VAT Amt(AED) ¡Adjustment(AED)
3 Supplies subject to reverse charge provisions*
6 Goods imported into UAE*
7 Adjustments to goods imported into UAE*
¡
Field 3 - Include:
• Services received from foreign suppliers (standard
rate & zero rate)
• Goods received which are subject to the reverse
charge provisions and have not been declared to
UAE customs
• Local supplies subject to the reverse charge
provisions
Field 6 – Imports through customs, automatically
populated
Field 7 – Adjustments to imports through customs
(Field 6)

41. VAT Returns
Include:
• Exports of goods and services outside the UAE.
• Local supplies of certain educational services and
related goods and services
• Local supplies of certain healthcare
• Supplies or imports of investment precious metals
• Supplies of crude oil and natural gas
Amount
(AED)
¡ VAT Amt
(AED)
¡Adjustment
4 Zero rated supplies*
Amount
(AED)
¡ VAT Amt
(AED)
¡Adjustment
5 Exempted supplies*
Zero Rated Supplies Exempted Supplies
Include:
• Local supplies of certain financial services
• Supplies of residential buildings through sale or
lease (other than zero rated)
• Supplies of bare land
• Supplies of local passenger transport

42. VAT Returns – Input Tax
Amount(AED) ¡ VAT Amt(AED) ¡Adjustment(AED)
9 Standard rated expenses*
10 Supplies subject to reverse charge*
¡
Field 9 - Include:
• Goods or services purchased for business purposes
from VAT registered suppliers ( at 5% VAT)
• Goods or services which were purchased at a
discount (with VAT)
• Goods or services purchased before your tax
registration and for which you wish and are able to
claim the tax incurred. The claim must be made in
your first VAT return
• Reductions in value due to credit notes received
from suppliers
• Errors that you are allowed to correct for previous
tax periods.
Field 9 - Exclude:
• Exempt or zero-rated purchases
• Expenses which were incurred to make exempt or
non-business supplies
• Purchases of goods located within designated
zones which were not consumed in the designated
zone or subsequently imported into the UAE
mainland
• Purchases from members of the same tax group
• Fines and penalty charges received e.g. Traffic fines
• Wages and salaries
• Expenses where the input tax is specifically
disallowed

43. VAT Returns – Input Tax
Amount (AED) ¡ VAT Amt (AED) ¡Adjustment (AED)
9 Standard rated expenses*
10 Supplies subject to reverse charge*
Field 10 - Include:
• Services received from foreign suppliers which are subject to the standard rate or zero rate of VAT
and for which you are eligible to recover any VAT (Reported in FIELD 3)
• Goods received which are subject to the reverse charge provisions (both – customs and non-
customs)
• Local supplies subject to the reverse charge provisions (e.g. specific supplies within the oil and gas
industry)
• Imports of goods from agents on behalf of an unregistered persons (Reported in FIELD 6 and/or
FIELD 7)

44. VAT Returns – Net VAT
The following fields will indicate your payable tax for the Tax Period
In case of refunds, there are two options;
• Carry forward of refunds
• Claim refund thro Form 311

45. Violations and Administrative Penalties

46. Tables of Violations and Administrative Penalties
Violation Penalty (AED)
The failure to keep the required records and other information 10,000 - First time
50,000 – Repetition
Failure to submit the data in Arabic when demanded 20,000
Failure to submit a registration application in time 20,000
Failure to submit the Tax Return within the timeframe 1,000 – First time
2,000 – Repetition
Failure to settle the payable tax stated in the submitted Tax
Return the timeframe
- 2% of unpaid tax when it is late
- 4% on the 7th day following late
- 1% per day after calendar
month
Others Different rates/ amounts

47. Source
Complete information on VAT is available on:
https://tax.gov.ae/index.aspx
Legislations are available at:
https://tax.gov.ae/legislation.aspx
Sector wise guidance is available at:
https://tax.gov.ae/help_guides.aspx

48. Are your questions answered…?
 Transaction related
 What is VAT ?
 What is covered under VAT ?
 At what rate to charge for which Items ?
 When to charge ?
 When to pay ?
 What happens to sales returns and Bad Debts ?
 What records to keep ?
 When, how and with what information to file returns ?
 What are the penalties for non-compliance ?

49. Thank You