By May 25, 2017CEO Newsletters

Topics Covered

General information
GCC VAT Agreements
VAT Mechanics
Other VAT Important Information

Who Started It

In 1954, Maurice Laure, French, invented indirect tax ( VAT). His idea was quickly adopted because it forced taxpayers at all levels in production process to administer and account for tax themselves, rather than putting the burden only on retailers or requiring assessment by tax authorities.

Who is Taxable Person?

Taxable person means any person (corporation or not) conducting an economic activity for the purpose of generating income.

VAT Payment System

Payment will be done via e-services online.


VAT period is every quarter (3 months) and deadline for payment is 28 days after tax periods.

It’s widely known the GCC region is about to embark on a structured change to it’s fundamental taxation model with the introduction of VAT (Value Added Tax) from 1st January 2018. Driven by dealing oil revenues and the need to diversify economic activities, governments throughout the GCC are fully committed to the introduction of VAT to ensure they are in the position to balance the books. Yet businesses throughout the GCC and those trading across the region are struggling to understand just what the introduction of VAT is likely to mean to their operations, although committed to its introduction and having announced the framework, the inherent lack to detail and the nearing deadline of its introduction means for many businesses confusion is riped amongst their finance professionals.

The UAE government has recently started as communication program consisting of seminars and forums, the latest of which was held last 3rd week in Dubai with the aimed to answer many of the questions facing businesses, the Ministry of Finance is working diligently to ensure that there is no disruption to their intended commencement.

So what does VAT mean? And where do we stand today with what we do know about the framework and regulations.

The UAE Ministry of Finance hosted several sessions related to VAT upcoming regime in GCC. The session aimed to send clear message to market about VAT go-live and the preparation needed for each tax person.


UAE had worked with IMF to study the shift from being oil and hydrocarbons dependent towards the most reliable source of revenue which is VAT. This will help the country funding high quality services to public.
VAT is part of economic agreement with entire GCC countries. Unified excise tax and VAT will benefit the region.
FTA (Federal Tax Authority) shall be in charge of managing, collecting federal taxes and related fines, distributing tax- generated revenues and applying tax related procedures in force in UAE.
UAE to implement VAT on 01 January 2018 while rest of GCC will have till January 2019 to implement.
UAE VAT registration opens during Q3 2017 (voluntary) and Q4 2017 (mandatory).
Threshold is based upon turnover of AED 375,000 (mandatory) while AED 187,500 (voluntary).
GCC VAT Agreement Structure is composed of 15 Chapters discussing from VAT definitions, scope, due dates, calculation, exemptions (refund), tax deductions, obligations, information exchange between members of each state, transitional provisions and appeals.
VAT groups will be available
GCC agreement relating to:
1. Health
2. Education
3. Real Estate
4. Real Estate
5. Education
6. Local transport (i.e. metro)

Member of each GCC country will have the right to choose whether to zero or exempt above mentioned categories.

Guidelines on basic VAT terminologies such as:

Standard rate (5%) across GCC

Vatable Supply

Zero rated items which will allow deductions or refund if exempt

Zero Rated


Reverse charges


Exemptions will be applied to charitable institutions, companies related to international event hosting (i.e. Expo 2020).
  • Farmers and fishermen are exempted from VAT.
  • FTA to issue guidelines on repayment/ refund of tax.
  • Tax refund for tourist, provisions is still being work out.
  • Tax refund for international organizations (i.e. diplomatic missions).
  • VAT on CAPEX is immediately deductible.
  • FOREX is not taxable.
  • Processing fee for remittance is taxable.

VAT is collected by registered suppliers down to entire supply chain.

VAT is payable by both businesses and individuals.

Not all business will be VAT registered supplies.


It applies to every single member in supply chain process.

Each person in supply chain will deduct VAT on preceded chain (ref, below image).

Collecting, deducting , remitting to government is borne finally by end consumer. Businesses only act as agent.



the passing of ownership of physical property or the right to use that property as an owner to another person (buying goods).


anything which is not supply of goods is supply of services (Example: car rental is services).


Is it goods or services? Answer: goods.

VAT invoices contains:

  1. Sequential no.
  2. Date of invoice
  3. Name, address and Tax registered number
  4. VAT invoices should be kept for 5 yrs.
  5. VAT returns should be printed and hard copies to be filed properly for FTA checking purposes.

Services/Goods only which started from 2018 will be vatable. VAT will be collected only after 31 Dec 2017 when services /actual construction runs in 2018 January.

GOODS – where it is?
SERVICES – where you are?

Should be filed where the transaction occur.
– For services, location of the customer.
– For goods, location of supplier.

VAT Groups

Entities with VAT Group will be treated as one entity.

  • VAT is applicable to ALL intercompany transactions.
  • VAT is applicable to subsidiaries
  • VAT groups will allow different companies to form one group to obtain one (1) registered number.

FTA will check if all companies is controlled (at least 51% owned) by one person.

– 6 months lapse from credit period
– Written off from the books of account.

UAE and EU VAT system is similar in terms of INTRA GCC trade system.

VAT PAYABLE FORMULA: VAT on Sales (Output tax) – VAT on Purchases and Expenses (Input TAX) = NET VAT payable to FTA.


FTA to conduct selection base audit (risk base).

FTA does not require companies to have external auditors.

FTA will call the companies to audit ( 5 days before the on-site audit) to allow preparation of documents.

FTA might conduct surprise visits/audit if there is illegal activity being informed.



Reconsideration by FTA officer.


Tax committee (1 judge, 2 tax experts, not from FTA)


Normal court system.

Meryjhel Casinas
Senior Consultant – MENA, Logistics Executive Group

Meryjhel is a highly-experienced finance professional with a Bachelor of Science in Accountancy and Certificate from CIMA-UK. Meryjhel has over 13 years of experience in financial accounting reporting, business analysis, budgeting and project management. She is a subject matter expert on accounting in courier, logistics and freight forwarding. Meryjhel has worked with government and consulting previously with Accenture. In addition, Meryjhel lead finance functions for one of the world’s largest logistics companies, FedEx Corporation with stints in the United Arab Emirates, Kenya and Afghanistan. She gained mastery of skills to manage finance functions, strategy development and leadership on her experienced in Middle East, Africa and Asian markets.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.