VAT IMPLEMENTATION IN THE UAE
IS YOUR BUSINESS VAT READY? WHAT IS VAT Applicable on every supply of goods and services Levied @5% (except Zero-rated and exempt supplies) Charged at each stage of economic activity throughout the supply chain
Liability to collect and deposit tax is on the supplier of goods and services (except in case of specified activities where liability is on recipient under Reverse Charge) VAT paid on procurements recoverable
HOW VAT WORKS VAT is calculated on the value of goods and services supplied and businesses can recover VAT paid on their business related expenditures, as illustrated below
VAT@5% AED 5
AED 5
Manufacturer
1 AED10
Price: AED 200 VAT: AED 10
AED 5
=
Wholesaler
AED 5
Tax remitted to the government
2
AED 5
AED 15
Price: AED 300 VAT: AED 15
AED 10 AED 5
Retailer
Consumer pays 5% VAT
Tax remitted to the government
Tax remitted to the government
Total Tax remitted to government
[
Consumer
1
+
2 +
3
[
Price: AED 100 VAT: AED 5
=
AED 5
AED 15
3
KEY ASPECTS FOR CONSIDERATION MEANING
WHAT IS REQUIRED?
Registration threshold: AED 375,000 Concept of ‘VAT Group’ registration wherein various companies can opt for single registration as a group Single registration number for VAT purposes Supplies made among members in a VAT Group not liable to VAT Only supplies made by VAT Group to an entity outside the Group liable to VAT
Ascertaining whether related parties are eligible for VAT Group registration Analyzing pros and cons of VAT Group registration considering all aspects (tax, commercial, business etc.) Making changes in group structure to optimize VAT costs Applying for VAT registration
REGISTRATION
TYPE OF SUPPLY Taxable supplies: Liable @ 5% VAT with full recoverability of VAT paid on procurements (certain transactions treated as deemed supply for levy of VAT) Zero-rated supplies: Not liable to VAT but full recoverability allowed in respect of VAT paid on procurements Exempt supplies: Not liable to VAT but no recovery allowed in respect of VAT paid on procurements
Analyzing each of the revenue streams for appropriate categorization Optimising tax credits, depending on the nature of supplies Changing transaction structure to optimize VAT costs Identifying deemed supply transactions (specifically with related parties) to determine taxability
PLACE OF SUPPLY Place of supply rules determine the location where the supply is ‘made’ for VAT purposes Where supply is made within the UAE, UAE VAT will be applicable Different place of supply rules for goods and services
Determining place of supply for each leg of transaction Building tax rule engine in systems so as to apply correct tax on each transaction
TIME OF SUPPLY Date of supply determines: When the liability to deposit VAT arises to account for output supplies Time period in which VAT liability should be declared in the VAT return
Reviewing terms of contract to determine the time of supply for each transaction Ascertaining cash flows and working capital impact based on time of supply
REVERSE CHARGE MECHANISM (RCM) Liability to pay VAT is on recipient of goods and services except under RCM where a recipient is liable to deposit VAT
Identifying all transactions where business would be required to deposit VAT under RCM
HOW CAN WE HELP Understand and map flow of goods and services from procurement to consumption
1
Identify principles for determining place of 2 provision of services
2
1
4
3
Eligibility to recover VAT on payments
Assess impact of VAT based on VAT legislation
This involves collating information / data relating to relevant business transactions like procurement of goods, provision of services, etc
3 4
Mapping of Current Transactions
Review of Key Contracts Review of key customer and supplier contracts Suggesting changes required in the contractual terms from a VAT perspective Operating Models Understanding existing business/ operating models. Perform a high-level "what-if analysis" from a VAT perspective – identifying possibilities of changes in business operations and structures for tax optimisation (if any) Review of existing IT systems Suggesting changes required to be made in systems from a VAT perspective. Ensure issuance of proper invoices, Credit/ debit notes. Generation of reports for computing tax & filing VAT returns Employment Contract/ Policies Review of employment policy & employment contract for understanding the benefits provided and assessing VAT implications on the same and suggesting changes (if required)
Pre-VAT Implementation Review
VAT READY Implementation Assistance
Financial Impact Analysis
VAT Training Providing VAT impact analysis with respect to various business variables along with the analysis of reasons contributing to the increase/ decrease
Revenue
Purchases
Tax Credits
Profitability
Working Capital
Tax liability
Undertake elaborate training involving Client’s team for a duration of 3-4 hours Purpose of this training would be to highlight the impact of VAT on the business and other key aspects for consideration under VAT for capacity building of the team
Transitional Issues Providing guidance with respect to transitional issues that arise during the go-live phase of VAT (e.g., continuing contracts, goods/services-in-transit etc.) Handling day-to-day queries from the Client’s teams with respect to implementation of the required changes
VAT Compliances Obtaining prescribed registrations under VAT and filing the relevant intimations. Comment on feasibility of taking group VAT registration Providing support with respect to the review of first VAT computation and tax credits. Assisting in review and filing of first VAT return
WHY CHOOSE MOORE STEPHENS Moore Stephens International is regarded as one of the world's major accounting and consulting networks, with its headquarters in London, consisting of 667 offices and some 27,081 people across 105 countries. Our member firms' objective is simple: to be viewed by clients as the first point-of-contact for all of their financial, advisory and compliance needs. They achieve this by providing sensible advice and tailored solutions to help clients achieve their commercial and personal goals. Moore Stephens member firms across the globe share common values: integrity, personal service, quality, knowledge and a global view.
Moore Stephens International maintains a cohesive association to ensure modern and comprehensive global services that meet standards of professionalism and deliver value in each country. The Moore Stephens network of offices that is spread over the United Arab Emirates, Sultanate of Oman, Saudi Arabia, Qatar, Bahrain, Lebanon, Kuwait, Jordan, Egypt, Iraq and Yemen is ranked among the top 10 largest firms internationally and in the Middle East region in the recently published statistics by the International Accounting Bulletin.
IN THE UNITED ARAB EMIRATES Since the establishment of the offices of Moore Stephens in the U.A.E., the practice has developed considerably and now services a wide variety of clients providing audit and management consultancy services. The local staff strength is over 80, most of whom are qualified Chartered Accountants from Asia and Europe. Our main office is located on the second floor of Al Zalfa Building, Garhoud, Dubai and has four branches in the Emirates of Dubai, Jebel Ali, Abu Dhabi and Sharjah. Since the firm has a long term interest and commitment in the U.A.E. as part of the extensive worldwide network of offices, all of the services referred above can be provided through the UAE offices.
AN EXPERIENCED TEAM
T
eam comprised of Senior VAT professionals with numerous years of practical experience have abilities and competencies matching your requirements and are dedicated to building value. We will leverage our existing knowledge and international experience to provide all VAT related services you require in a responsive and efficient manner.
THE RIGHT APPROACH
T
he Moore Stephens approach ensures that our service level is both robust and challenging and addresses key VAT issues. In addition, we feed back what we learn and offer advice for your future development and strategies.
THE RIGHT SERVICE
THE RIGHT PRICE
We
We
will provide you with a responsive service, ensuring we meet agreed deadlines and potential VAT issues as soon as they arise.
are sensible in calculating our proposed fee, to ensure that our clients receive value from the relationship.
OUR GCC OFFICES El Sayed El Ayouty & Co. Al-Khobar, Saudi Arabia Tel: +966 (13) 882-2193
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