1. Key risks and challenges of VAT
26 September 2017

2. VAT impacts across the business
16/05/2013
VAT impacts across the business
Procurement & production
Supplier’s pricing
A/P invoice processing time
Purchases from non-registered VAT businesses
Education of suppliers
Sales & marketing
Samples/marketing
Pricing strategies
Returned goods
Education and communication to consumers
Billing
Finance
Bad debts
Deposits/ advanced payment
Leases and hire purchase
VAT return preparation
Disposal of assets
Sales of scrap
Human resources
Fringe benefits
Gifts to employees
Employees allowance and claims
Legal
Existing and new contracts
Are any payments based on revenue/ turnover (franchise or royalty arrangements) IT
System changes
Documentation (Tax Invoices)
Reports for VAT return

3. Examples of different types of supply
Expected treatment in UAE
Zero rated
Exempt
Standard rated
Specified education
Specified Healthcare (medicines and certain medical equipment list to be agreed across GCC)
Supplies of identified sea, air and land means of transportation (international transportation)
Exports of goods and services
Identified investment grade precious metals
Newly constructed residential properties that are supplied for the first time (and within 3 years of their construction)
Financial services (margin- based) by banks and financial institutions
Life insurance
Bare land
Local passenger transport
Lease of residential properties
Everything else
Treatment of free zones is yet to be clarified

4. VAT technical Decision Making
Scope
(Goods &
Services)
Types of
supplies
(VAT rates)
Registration threshold
Place of
supply
Compliance (VAT
accounting/
collection)
Time of
supply
VAT technical Decision Making
GCC
regulations
VAT recovery (Tax Invoices)
Taxable person

5. Simplified supply chain
Third Party
UAE
Third Party
UAE
Key challenges
VAT Credit position in UAE?
Working capital impact
Business process changes
System changes
Recruitment and training
Documentation requirements
Transitional arrangements
Goods & Services + VAT
Goods & Services + VAT
Enity
UAE
Third Party
GCC
Third Party
GCC
Goods – Reverse Charge?
Services – Reverse charge?
Goods – Zero rated?
Services – Reverse charge?
Goods – Import VAT?
Services – Reverse charge?
Goods & services
zero-rated?
Third Party
RoW
Third Party
RoW

6. Key risks of not doing it right
Processing incorrect AP invoices
Issuing incorrect Tax invoice
VAT recovery not supported by correct documentation and will be reversed
COST: 5% of purchases in question
Customer disputes an invoice, payment delayed, additional administrative burden to produce correct invoice
COST: cash flow and admin
Entity
No timely VAT registration
Incorrect VAT filings
VAT on costs will be charged but can not be recovered. Late registration will result in penalties for non- compliance period. VAT not charged to customers, but due by entity
COST: 5% of purchases + 5% of sales + penalties
Upon audit FTA will charge all underreported VAT which can not longer be passed to customers. Any deductions denied can not longer be negotiated with suppliers.
COSTS: 5% on selected purchases + 5% on selected sales + penalties

7. Thank you