An introductory guide to the implementation of VAT in the UAE which we have been using as part of our client training and awareness sessions - feel free to share with colleagues and use as part of your reference materials.

1. sabeel advisory
UAE VAT Starter Pack
sabeelwww.sabeel.ae

2. Contents
sabeelCopyright © 2017 Sabeel Advisory. This document and its content including the Sabeel logo are owned by Sabeel Advisory and protected by
international copyright laws. Any unauthorised copying or use of this document will constitute an infringement of copyright. All rights reserved.
Section Description Page
1 Simple VAT Overview 3
2 VAT Fact Sheets 4-7
3 Sample VAT Return 8
4 VAT: Path to Compliance 9
5 About Us 10
6 Our Values 11
7 Contact Us 12
2

3. 1. Simple VAT Overview
B) Manufacturer / Retailer
/ Service Provider
A) Suppliers C) Customers / Clients
Federal Tax Authority
Goods Sold / Services Provided
Sales Proceeds / Fees:
AED 1,050 (incl VAT)
Supplies Purchased / Expenses
Supplier Payments: AED 525 (incl VAT)
Invoiced Amount:
AED 1,000 + 5% = AED 1,050
Invoiced Amount: AED 500 + 5% = AED 525
B - VAT Return
Outputs (payable to FTA): (50)
Inputs (reclaimed from FTA): 25
Net VAT payable: AED (25)
A - VAT Return
Outputs (payable to FTA): (25)
Inputs (reclaimed from FTA): 0
Net VAT payable: AED (25)
Total Tax
Receipts:
AED 50
VAT borne
by end
consumer:
AED 50
Copyright © 2017 Sabeel Advisory. All rights reserved.
sabeel3

4. 2. VAT Fact Sheets (1/4)
Copyright © 2017 Sabeel Advisory. All rights reserved.
sabeel4
➢ VAT Fundamentals
➢ VAT is a consumption tax applied at each stage of the supply chain.
➢ A VAT registered business will charge VAT on sales made to customers (‘output VAT’ – this could be the sale of physical goods or provision of services) and pay VAT on goods /
services purchased from suppliers (‘input VAT’). The net output / input VAT will be paid to or reclaimed from the Federal Tax Authority (FTA).
➢ VAT registered businesses will effectively act as ‘tax collection agents’ for the Government, however it is ultimately the final consumer who will pay VAT.
➢ GCC VAT Framework
➢ GCC VAT Framework has been signed by all six countries of the GCC (UAE, KSA, Kuwait, Oman, Qatar, Bahrain).
➢ The framework outlines the broad VAT principles to be followed across the GCC; individual countries have been permitted to issue their own domestic VAT laws based on these
underlying principles.
➢ Qatar’s participation in the GCC VAT roll out remains unclear and needs to be monitored
➢ GCC VAT Go-Live Date
➢ 1st January 2018 or 1st January 2019 at the very latest. The UAE is on target to implement VAT by 1st January 2018.
➢ Businesses are able to register for VAT online via the FTA website (https://www.tax.gov.ae/index.aspx) and were required to complete their registration applications by 4th
December 2017; each business will be issued with a unique Tax Registration Number (TRN) which must be quoted in all correspondence with the FTA and any transactions
conducted (for example on sales invoices).
➢ The final VAT Law and Executive Regulations have been published and provide full details of how and when VAT is to be applied.
➢ Thresholds
➢ Annual Sales greater than AED 375,000 – mandatory registration
➢ Annual Sales less than AED 375,000 but greater than AED 187,500 – voluntary registration
➢ Annual Expenses greater than AED 187,500 – voluntary registration

5. 2. VAT Fact Sheets (2/4)
➢ Group Registration
➢ Related Businesses which have common financial and regulatory ties may be permitted to register as one Group for VAT purposes.
➢ Any transactions between group members would not be subject to VAT and one member of the group would be appointed as a representative to submit consolidated VAT returns
➢ All group members would be jointly and severally liable for any VAT debts
➢ VAT Return Submission
➢ Most businesses will be required to submit their VAT returns on a quarterly basis within 28 days from the end of the tax period; there may be exemptions allowing some
businesses to file returns at other intervals.
➢ VAT returns will be submitted online via the ‘eServices’ portal / dedicated FTA website.
➢ Record Keeping
➢ Businesses will be required to keep books and records evidencing business activities and transactions for a minimum period of 5 years; for real estate businesses the requirement
is to maintain books and records for 15 years
➢ Businesses are recommended to have full and clear traceability of the information entered on a given VAT Return to the specific sales / expenses which have given rise to the
output / input VAT reported in the period; this will help ensure compliance with the VAT Law and will enable businesses to be fully prepared in the event of an audit notification
issued by the FTA (including any ad-hoc queries).
➢ Zero-Rated vs. Exempt Supplies
➢ A zero-rated business will still be able to register for VAT; although such businesses will charge 0% VAT on their sales (and hence not have to remit output VAT to the FTA), they
will still be able to reclaim VAT on any purchases of good / services. Examples of zero-rated activities include private and public school education (excluding higher education),
preventative healthcare services, the first sale of residential buildings (plus rental of residential accommodation) and the export of goods / services to outside the GCC.
➢ VAT exempt supplies will not attract output VAT at all and businesses making such supplies will be unable to reclaim any input VAT on expenses incurred in the provision of
exempt supplies. Examples are domestic passenger transportation, the supply of some financial services (such as margin based products) and bare land.
Copyright © 2017 Sabeel Advisory. All rights reserved.
sabeel5

6. 2. VAT Fact Sheets (3/4)
➢ Real Estate
➢ Residential real estate development will be treated as a zero-rated activity for VAT purposes. Hence the first supply of residential properties within 3 years of their completion will
attract 0% output VAT but Developers will still be entitled to recover VAT on construction costs.
➢ The subsequent sale of residential property will be exempt from all VAT, ensuring that homeowners are not penalised with an irrecoverable VAT cost. Rentals of residential
properties will also be VAT exempt.
➢ Commercial real estate will be subject to the standard rate of VAT (including both sales and rentals).
➢ Place of Supply
➢ From a VAT perspective, the place of supply will indicate whether a given supply has been made within the UAE (in which case the supply will be subject to the UAE VAT standard
or zero rate) or outside the UAE (in which case no UAE VAT will be charged).
➢ For a supply of goods, the place of supply will be determined by the location of the goods when the supply takes place; for a supply of services, the place of supply will be driven
by where the supplier is established.
➢ Special rules will apply for certain categories of supplies (for example the supply of water, energy, cross border supply of goods and / or services between businesses).
➢ Import / Export of Goods & Services
➢ The export of goods and services to outside the GCC will be treated as zero-rated.
➢ Where a business is registered with the FTA for VAT purposes, VAT will be applied at the standard rate to the import of any goods and services by that business using the ‘reverse
charge mechanism’ (special rules apply if imported goods are to be re-exported to another GCC member state). VAT will be payable by the importer in addition to custom duties.
➢ If the importing business is not VAT registered, VAT will need to be paid on the import of goods from a place outside the GCC.
Copyright © 2017 Sabeel Advisory. All rights reserved.
sabeel6

7. 2. VAT Fact Sheets (4/4)
➢ Designated Zones (Free Zones)
➢ In general, Designated Zones (or Free Zones) will be treated as being outside the State and outside the implementing States if:
➢ They are a specific fenced geographic area and there are controls in place to monitor entry / exit of individuals and movement of goods.
➢ They have internal procedures in place around the storage and processing of goods.
➢ Supplies of goods between businesses in designated zones will not be subject to VAT; supplies of goods will otherwise attract VAT.
➢ Supplies of services by Free Zone businesses, regardless of where they are delivered in the UAE, will be subject to VAT.
➢ FTA Audits, Queries & Penalties
➢ The FTA will have the right to perform a Tax Audit on any business at any time (subject to prior notice of at least 5 business days) to verify their compliance with the Tax Laws.
➢ Tax Auditors will have the right to inspect original records or copies thereof and will also have the authority to take samples of goods, equipment or other assets as part of any tax
investigation.
➢ Any business deemed to be in non-compliance of the tax laws will be subject to fines and penalties issued by the FTA (businesses will have the right to appeal against a decision of
the FTA – a framework has been established to govern this).
➢ Tax evasion in particular will be treated as a serious offence and will attract large fines applied on top of the principal VAT owed. Businesses could also be closed down for 72
hours and the UAE Courts could apply further penalties, decided at their discretion.
➢ Further information
➢ Further information and material can be accessed via the dedicated webpage set up by the Ministry of Finance (https://www.mof.gov.ae/En/budget/Pages/VATQuestions.aspx)
and the FTA website (https://www.tax.gov.ae/index.aspx).
Copyright © 2017 Sabeel Advisory. All rights reserved.
sabeel7

8. 3. Sample VAT Return
Copyright © 2017 Sabeel Advisory. All rights reserved.
sabeel8
The below example outlines the typical information required in a standard VAT Return:
NB. Please note that the
example shown is for
guidance only, the exact
information required
will be confirmed by the
Federal Tax Authority in
due course.
All amounts and values
shown are for indicative
purposes only.
Company Name: XYZ LLC Tax Registration Number: 123456789
Company Address: Dubai, United Arab Emirates Period: 03/18 From: 01/01/18 To: 31/03/18
Return & Payment Due Date: 28/04/18
1. VAT due in this period on sales and other outputs within UAE Dubai AED 10,000
Abu Dhabi AED 5,000
2. VAT due in this period on sales and other outputs to GCC member states AED 0
3. Total VAT due AED 15,000
4. VAT reclaimed in this period on purchases and other inputs (including from GCC member states) AED 5,000
5. Net VAT to be paid to FTA or reclaimed by you AED 10,000
6. Total value of taxable supplies subject to standard rate (excluding VAT) Dubai AED 200,000
Abu Dhabi AED 100,000
7. Total value of taxable supplies subject to zero rate (excluding VAT) Outside GCC AED 10,000
8. Total value of exempt supplies AED 0
9. Total value of sales and outputs to GCC member states (excluding VAT) AED 0
10. Total value of purchases and inputs (excluding VAT) AED 100,000
11. Total value of purchases and inputs from GCC member states (excluding VAT) AED 0
Declaration: I confirm that the data entered above is correct and wish to submit my VAT Return to the Federal Tax Authority
Submission Date: 20/04/18 Submission Time: 13:05:50 Submission Reference: 123456789-0318

9. 4. VAT: Path to Compliance
9
Initial Impact
Assessment
• Determine commercial
impact by reviewing sales
and expenses and VAT
potentially payable /
receivable
• Identify key risks, issues and
dependencies
• Review effect at the
organisational, operational
and financial levels
• Review impact on systems &
processes
Project Initiation
• Prepare project plan and
agree scope
• Determine resources
required
• Engage system vendors
• Draft staff training plan
• Reaffirm risks, issues and
dependencies
Design &
Implementation
• Mobilise project team
• Finalise changes / updates
required to systems,
controls, reporting and
governance
• Issue requirements to
system vendors to action IT
changes
• Staff training around process
changes required and
maintenance of books &
records
Testing & VAT
Registration
• Test system changes – is the
system capable of
calculating, recording and
reporting output / input
VAT?
• Test process / operational
changes
• Complete VAT registration
and ‘live phase’ test to
ensure successful submission
of first VAT Return
i ii iii iv
Ongoing Compliance
(Quarterly VAT Service)
• Independent review & assessment of sales & expenses
• Calculation / validation of output & input VAT
• Production of Management Report documenting
company financials, performance and VAT position
• Preparation & submission of VAT Return to FTA
• Assistance with FTA queries
v
A summary of our approach to getting clients prepared for the VAT go-live and ensuring ongoing compliance with the Tax Regulations:
Copyright © 2017 Sabeel Advisory. All rights reserved.
sabeel

10. 5. About Us
Sabeel consultants have multiple years’ of experience working with some of the top global companies and are
highly skilled professionals. Below is a selection of clients where our consultants have previously worked and
provided services:
▪ Successful implementation of
new cash reconciliation for
Structured Credit Business
enabling closure of audit
point
▪ Roll out of Finance
Transformation Global
Control Framework strategy
and delivery approach,
driving consistency across
businesses and regions
▪ Demise of manual processes
resulting in saving of 10 FTE
globally
▪ Creation of Capital Plan Database for
management of all Treasury Planning &
Forecasting activities
▪ Reduction in operational risk; time saving of 25
hours per month
▪ Implementation of real time calculation
engine, enabling Treasury users to instantly
view impact of source data and methodology
changes on key metrics
▪ Delivery of strategic Global
MI platform, bringing
consistency in reporting
processes across Businesses
and Regions and leading to
global FTE savings
▪ Implementation of
functionality to view P&L
adjustments on a real-time
basis, a considerable
improvement from legacy
reports where adjustments
were only possible to view on
a T+1 basis
▪ Successful completion of trade migration
project, moving trades from legacy trading
systems to strategic platform
▪ Delivery of data quality enhancements to
MI reporting system, enabling supply of
high quality information to Client MI
Reporting Team
▪ Provision of services within Finance Product Control,
reconciling and reporting daily trader P&L in Fixed Income
and Structured Equity Businesses
▪ Identification of process improvement opportunities and
initiation of supporting projects
10 Copyright © 2017 Sabeel Advisory. All rights reserved.
sabeel

11. 6. Our Values
At Sabeel we take our relationships and business practices seriously. In a fast paced business environment like
the UAE, it is vital that we understand our values and stick to them – we believe that our success is dependent
on upholding the highest professional standards.
Dedication
Sincerity
PositivityTrust
➢ Trust
Trust lies at the heart of every
relationship; you can trust Sabeel to act
with integrity and transparency and
maintain confidentiality throughout and
after our assignment
➢ Sincerity
Our advice is always sincere because we
genuinely want our clients to succeed;
we believe that a sincere intention to
help clients in achieving their objectives
is a fundamental pillar of every
engagement, regardless of duration and
fees
➢ Positivity
We always maintain a positive outlook,
even in difficult and challenging
circumstances; we reject pessimism and
negativity
➢ Dedication
Commitment to clients is a core part of
the Sabeel philosophy; we value
longevity in our engagements and aim to
see things through to a successful
outcome
Copyright © 2017 Sabeel Advisory. All rights reserved.
sabeel11

12. 7. Contact Us
621 Tamani Arts | Business Bay | Dubai
+971 55 135 8628 | +44 7852 951 525
info@sabeel.ae
www.sabeel.ae
Copyright © 2017 Sabeel Advisory. All rights reserved.
sabeel12