The course is taxation - Paper Answers

Assignment2 Assignment1 April_Lectures_TaxationandZakat.pptxApril19_Lectures_TaxationandZakat1.pptxApril19_Lectures_TaxationandZakat.pptxApril14_Lectures_TaxationandZakat2.pptx220302020_Lectures_TaxationandZakat.pptx17032020_Lectures_TaxationandZakat4.pptx08032020_Lectures_TaxationandZakat2.pptx28022020_Lectures_TaxationandZakat11.pptx

The course is taxation

Sharjah University

Taxation and Zakat

Midterm exam – assignment 2

Assignment: 2

Total marks: 25

Due date: 7 May 2020

Task 1 (marks 15)

A Japanese company (“Jap Co”) is intending to start up a new business in the UAE with the name of “Jap

NewCo” and wants to avail the benefits of customs duty exemption under the Greater Arab Free Trade

Area (“GAFTA”) based on its supply chain model. It has provided following two model options for your

review:

Model 1

► Under this transaction model, Jap NewCo will be established in mainland UAE as a ‘Branch’ of Jap

Co. Subject to permissibility, Jap NewCo will obtain a trading license from the Department of

Economic Development in Dubai (“DED”).

Model 2

► Under this transaction model, Jap NewCo will be established in one of the UAE Free Zones as a

‘branch’ or ‘wholly owned subsidiary’ of Jap Co. Jap NewCo will obtain a trading license from the

respective Free Zone Authority.

Definition

KSACo Manufacturer of steel products based in

KSA

Jap
NewCo

Jap new proposed entity in mainland
UAE for undertaking intermediary trade

Jordan
Co

Customer/importer in Jordan

Sharjah University
Taxation and Zakat

Midterm exam – assignment 2

Definition

KSACo Manufacturer of steel products based in KSA

Jap NewCo Jap new proposed entity in the UAE Free

Zone for undertaking intermediary trade

Jordan Co Customer/importer in Jordan

Please analyze both models from the UAE customs perspective and suggest Jap Co which model is

feasible for them and why? Please use the PPT for providing your comments and suggestions.

Task 2 (marks 10)

A company dealing in consumable products is established in Oman and wants to import goods into the

UAE which are excisable from the UAE excise tax standpoint. It is currently looking for different options

to set up a business/register it in the UAE mainland area or free zone area. Please briefly explain what is

the process to register a company from an excise tax standpoint in the UAE and which area (free zone vs

mainland) is feasible for them. Also, they want to defer the payment of excise tax and store the goods

into a warehouse. What should they do in order to avail this option?

Hint: please note that all the UAE free zones (from customs perspective) are not designated zones from

the UAE excise tax perspective. You can use Word doc in order to respond your questions

SharjahUniversity

Taxation and Zakat

Midterm exam – assignment 1

Assignment: 1

Total marks: 25

Due date: 7 May 2020

Task 1 (marks 15)

We have discussed free zone and mainland concepts during our lectures. Among others we referred Jebel

Ali Free Zone Area (JAFZA) for many examples. A similar kind of free zone is available in Fujairah and you

have been approached by ABC to help them from the UAE customs perspective.

ABC Trading Company (“ABC”) is a 100% subsidiary of a Saudi based company which trades refined, liquid

chemical and polymer products. ABC has a branch in Fujairah Free Zone (“FFZ”) in UAE with a commercial

license since 2015. The branch is an entity with no employees or an actual office. ABC is engaged with a

third-party storage provider, to store its hydrocarbon products which are imported and exported out of

the FFZ. Some blending activities are taking place in storage. ABC is currently analyzing its global

operations and is considering several options to set up an overseas office. One of these options is to set

up a separate legal entity in the FFZ with an office and its own employees. The FFZ is located in the

northern Emirate of Fujairah adjacent to the port of Fujairah and is administered by FFZ Authority. The

new legal entity in the FFZ will manage the storage of hydrocarbon products and arrange for ship-to-ship

transfers globally. ABC has requested you to prepare a high-level set of slides outlining the benefits and

implications of operating in a free zone from a customs duty perspective.

Please consider the following points whilst preparing the slides (PPT):

► Customs registrations requirements to operate in the FFZ

► Import of goods into the FFZ from outside of the GCC (“Rest of the World” or “RoW”)

► Import of goods into the FFZ from other GCC Countries

► Import of goods into the FFZ from the Mainland UAE area

► Export of goods from the FFZ to outside of the GCC (RoW)

► Export of goods from the FFZ to other GCC countries

► Export of goods from the FFZ to the Mainland UAE area

► Transfer of goods from the FFZ to other free zones in the UAE

► Transfer of goods within the FFZ to companies in the FFZ

► Purchase of services from outside of the GCC (RoW), within GCC, from the UAE Mainland area, and

from within the FFZ

Task 2 (marks 10)

XYZ is a global leader in international engineering and services business dealing in manufacturing of

elevators. XYZ HQ exports electronics goods and parts thereof to XYZ UAE, which are classified under

specific HS tariff code. XYZ UAE operates under a valid trade license. The commercial register of XYZ UAE

covers only two HS codes:

Sharjah University
Taxation and Zakat

Midterm exam – assignment 1

 Heading 8428 of the UAE tariff – for elevators

 Heading 843131 of the UAE tariff – for elevators parts

The spare parts portfolio of XYZ UAE covers various types of products and therefore are classified in

different HS tariff codes, apart from the HS tariff codes 8428 and 843131. Based on the WCO HS rules,

various elevators parts, even if manufactured solely or principally for the elevators are not classified under

the HS code 843131. XYZ HQ found that commercial register of XYZ UAE covers only aforementioned HS

codes and therefore, they asked XYZ UAE to manually modify the documentation, which consequently

may impact the customs duty percentage. XYZ UAE refused to make any changes to their existing process

and emphasized to classify the goods according to already practiced two HS codes.

Please analyze the above situation and convince XYZ UAE for the significance of using correct HS code

from a future perspective whilst highlighting any risks arising from incorrect tariff classification of goods

from the UAE customs standpoint. Please use PPT or Word doc for answering this question.

Taxation and Zakat
University of Sharjah
Dr. Atia Hussain

Jan – May

About color themes

Choose the appropriate design theme for your presentation. The first two options on the design tab are correct EY themes, these two are the only ones that should be used. (

) light backgrounds for handouts; (2) dark backgrounds onscreen.

Course Program

Section

Week 1 (19 Jan): Introduction to Taxation & Zakat

Week 2 (26 Jan): Indirect tax – Customs

Week 3 (2 Feb): Indirect tax – Customs

Week 4 (9 Feb): Indirect tax – Customs

Week 5 (16 Feb): Indirect tax – Excise (18 Feb no lecture)

Week 6 (23 Feb): Indirect tax – Excise

Week 7 (1 Mar): Indirect tax – Conclusion and guest speaker

Week 8 (8-18 March Mid term exam)

Week 10 (22 Mar): Indirect tax – VAT

Week 11 (29 Mar): Indirect tax – VAT

Sharjah university – Taxation & Zakat

About color themes

Choose the appropriate design theme for your presentation. The first two options on the design tab are correct EY themes, these two are the only ones that should be used. (1) light backgrounds for handouts; (2) dark backgrounds onscreen.

1
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2

07 April 2020
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Course Program
Section Pages
Week 12 (5 Apr): Indirect tax – VAT
Week 13 (12 Apr): VAT conclusion and guest speaker
Week 14 (19 Apr): Direct tax – Personal income tax
Week 15 (26 Apr): Direct tax – Corporate income tax
Week 16 (3 May): Zakat (9-19 May Final Exam)

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Lecture 01

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Introduction to Taxation and Zakat in the
United Arab Emirates (UAE)
Zakat
Tax
Direct tax
Indirect tax
Corporate Income tax
Personal Income tax
Customs duty
Value Added Tax (VAT)
Excise tax

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Introduction to Taxation and Zakat in the UAE
Basic structure/definitions
Tax
A compulsory contribution to state revenue, levied by the government on individuals’ income and corporate business profits, or added to the cost of some goods, services, and transactions.
Direct tax – income or profits
Corporate income tax (oil companies and foreign banks)
Personal income tax (different sources of income ie salary, rental, capital gains, income from property, interests, dividends, royalty, others)
Indirect tax – goods and services
Customs duty (almost on all imported goods with exception of some food items)
VAT (goods and services)
Excise (tobacco and tobacco products, energy and carbonated drinks, sweetened beverages)

Sharjah university – Taxation & Zakat

Introduction to Taxation and Zakat in the UAE
Basic structure/definitions
Zakat
Religious mode
Annual payments
Property/cash/gold
Rate: 2.5%

Sharjah university – Taxation & Zakat

Introduction to Indirect tax
Customs duty
Federal Customs Authority (FCA)
Customs has existed in the UAE for more than one hundred years. Going through several phases, customs took the institutional shape in the age of the late Sheikhs Zayed bin Sultan Al Nahyan and Rashid bin Saeed Al Maktoum, Ruler of Dubai.
The actual executive steps to establish the Federal Customs Authority (FCA) were taken in 2002.
The FCA draws the customs policies, supervises the execution of customs-related laws and legislation and represents the UAE inside and outside the state. Local customs departments do the executive work and draw the customs policies for each emirate in compliance with the Common Customs Law.

Sharjah university – Taxation & Zakat

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Lecture 02 and 03
Page 8

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General Agreement on Tariffs and Trade (GATT) – UAE member since 8 March 1994
The General Agreement on Tariffs and Trade (GATT) is a legal agreement between many countries, whose overall purpose was to promote international trade by reducing or eliminating trade barriers such as tariffs or quotas. … The GATT, and its successor the WTO, have successfully reduced tariffs. GATT was entered into force on 1st Jan 1948.
World Trade Organization (WTO) – UAE member state since 10 April 1996
Established on 1st Jan 1995 in Geneva Switzerland, the World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments. The goal is to ensure that trade flows as smoothly, predictably and freely as possible.

GCC Customs Union
Referred Law/tariff book/Free Trade Agreement

Sharjah university – Taxation & Zakat

GCC Common Customs Law (2002)
XVII Sections
Chapters
Parts
Articles
Harmonized System of Tariff Classification (tariff code) (2017)
XXI Sections
98 Chapters
Heading
Sub-heading
GCC Free Trade Agreement – Unified Economic Agreement
Greater Arab Free Trade Agreement (GAFTA)

GCC Customs Union
Referred Law/tariff book/Free Trade Agreement

Sharjah university – Taxation & Zakat

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Introduction to Indirect tax
Customs duty
The Gulf Cooperation Council (“GCC”) Customs Union member states (UAE, Bahrain, Kuwait, Oman, KSA and Qatar) are governed by a Common Customs Law which was implemented in 2003 and it is based on the principle of a single entry point upon which customs duty on foreign imported goods are collected.
The UAE is a confederation of seven Emirates ruled by different families and each of the Emirate has its own customs authority.
Dubai
Sharjah
Abu Dhabi
Ajman
Fujairah
Ras-Al Khaimah
Umm Al Quwain

Sharjah university – Taxation & Zakat

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GCC Customs Union

The Gulf Cooperation Council (“GCC”) Customs Union member states (UAE, Bahrain, Kuwait, Oman, KSA and Qatar) are governed by a Common Customs Law which was implemented in 2003 and it is based on the principle of a single entry point upon which customs duty on foreign imported goods are collected.
Most foreign imports into the GCC customs union are subject to a duty rate of 5% except certain exempt items (including basic foods, pharmaceuticals and some IT equipment).
The rate of customs duty in Saudi Arabia may be slight higher than the UAE on some items.
Base for the duty amount is the cost, insurance and freight (“CIF”) value of the imported goods.
Concept of national products and its benefit: Goods considered being of GCC origin for customs duty purposes are treated as ‘national products’, and should also not be subject to any customs duty when moved within the GCC member states with appropriate documentation (GCC Certificate of Origin).
40% value added percentage: There is no specific percentage set out in the GCC Customs Law for the GCC national origin requirements. The value add percentage thought to be required is 40%. However, this does vary from industry to industry and the respective authority can require more than 40% value addition.
Preferential and non-preferential origin: Goods must be accompanied by a Certificate of Origin in the prescribed format issued by the local competent authority (e.g., The Ministry of Economy).
Foreign goods previously imported must be accompanied by proof (e.g., Makasa stamp or GCC statistical declaration) that customs duty was previously paid at the first point of entry into the GCC member state.

Sharjah university – Taxation & Zakat

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UAE free zones customs regime
Free zones
Free zones in the UAE – purpose and benefit
Free zones and customs duty/ application of law
Customs duty on first entry point
Business sphere of the free zones companies
License and customs client code

Sharjah university – Taxation & Zakat

UAE free zones customs regime
Example: Jebel Ali Free Zone Area (JAFZA)
Each morning you pass through the gate…
…you are effectively leaving the UAE
And arriving into:
An ‘overseas’ fiscal territory
A highly customs controlled and regulated area
One of the world’s largest free zone

Sharjah university – Taxation & Zakat

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UAE free zones customs regime
Example: Jebel Ali Free Zone Area (JAFZA)
All materials, products and equipment brought into JAFZA…
…are entering a duty free zone

And are under strict customs controls upon:
Arrival and entry
Place of physical whereabouts within the JAFZA territory
Removal or transfer of ownership
The retention of records, accounts and documentation

Sharjah university – Taxation & Zakat

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UAE free zones customs regime
Example: Jebel Ali Free Zone Area (JAFZA)
Established in 1985 JAFZA…
…has experienced exponential growth in its size and sophistication, and is today:
The world’s seventh largest container port
With over 7,000 registered companies employing more than 135,000 people
A major global exporter with total annual trade of around USD 70 billion

Sharjah university – Taxation & Zakat

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UAE Mainland area
Setting-up a company in the UAE mainland (non-free zone area) requires the participation of a local partner (UAE National).
Local ownership – 51%
Foreign ownership – 49%
Requirement of an appropriate trade license and a valid customs client code
Customs duty at the time of imports (mostly at 5% of CIF)
Customs duty for exports (zero%)

Sharjah university – Taxation & Zakat

Lecture 04
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Basics in Global Trade
Parties involved and commercial documents required during import/export process
Importer/consignee: natural or legal person importing the goods
Exporter/consignor: natural or legal person exporting the goods
Importer of Record (IOR): It refers to an importer, whether an entity or individual, who is responsible for ensuring that legal goods are imported in accordance with the law of the place. Importer is responsible for filing legally required documents. It can be the owner, consignee or the customs broker.
Exporter of Record (EOR)
Purchase order
Commercial invoice
Packing list
Certificate of origin

Sharjah university – Taxation & Zakat

Basics in Global Trade
Parties involved and commercial documents required during import/export process
Bill of lading: is a legal document issued by a carrier to a shipper that details the type, quantity, and destination of the goods being carried. A bill of lading also serves as a shipment receipt when the carrier delivers the goods at a predetermined destination.
DHL (Dalsey, Hillblom and Lynn)
Maersk
Gulf Agency Co (GAC)
Health certificate
Halal certificate
Delivery note
Customs declaration
Customs broker
Freight forwarder/logistics services provider
Third party logistics services provider
Payment receipt/Bank reconciliation

Sharjah university – Taxation & Zakat

Basics in Global Trade
Sample Commercial invoice
Company logo, consignor name & address, consignee name & address, invoice number and date, unit value, unit measurement, total quantity and weight, total value and currency, HS code, shipping/delivery terms, goods description, country of origin and company stamp
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Basics in Global Trade
Sample Packing list
Shipper name and address, consignee name and address, date, invoice number, item code, goods description, gross and net weight, production date, expiry date, quantity of pallets, unit and number of boxes).
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Basics in Global Trade
Sample Certificate of origin
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Basics in Global Trade
Sample customs declaration/Bayan/Bill of entry
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Basics
Customs topics
Tariff classification
Origin of goods
Incoterms
Customs valuation
Temporary imports
Free Tarde Agreements
GCC free trade agreement
Greater Arab Free Trade Agreement

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Lecture 05
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Tariff Classification
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Customs
Tariff classification – why it is important

Customs laws require that all imported goods be “classified” or assigned a number that indicates the nature of the good being imported
To determine the rate of customs duty
To determine whether special permission is needed to import goods
To determine whether the goods are legally permitted to be imported
To determine whether special duty reduction programs can be used
To determine the criteria under which the goods are eligible for reduced duty rates under trade preferences
Assigning an incorrect classification may lead to:
Overpayment or underpayment of customs duty by the importer
A failure to satisfy import restrictions
Fines and penalties
Shipment delays resulting from product examinations by customs officials

Sharjah university – Taxation & Zakat

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Customs
Tariff classification – who is responsible

Varies by country but within GCC it is generally the importer of record, even if the customs broker files the declaration
Remember: the customs broker can only declare classifications based on the data given to them; improper or incomplete data will lead to customs errors

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Customs
Tariff classification – Harmonized System

Major trading countries of the world decided to create an internationally recognized system of product or tariff classification, intended to be a single, modern system for both product classification, and customs tariff-related statistical and transport-documentation purposes
The WCO is responsible for the development of the Harmonized Commodity Description and Coding System (“Harmonized System” or HS), which came into effect on 1 January 1988
The WCO has a Harmonized System Committee, which meets twice a year in Brussels, Belgium where the WCO is based
The first six digits of the tariff code are therefore the same among all countries using the HS
Digits beyond those six are country-specific additions. Some countries add no digits, some add up to eight additional digits
The GCC countries have formally adopted the HS, or have based their classification regimes on it

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Customs
Tariff classification – Harmonized System

The HS is divided into 97 Chapters, arranged in 21 Sections
Some countries add additional chapters such as Chapter 98 and Chapter 99
HS Chapters are generally arranged by the complexity of the product types, beginning in Chapter 1 with crude and natural products and continuing on to complex forms of machinery
In addition, within each chapter, the classifications are organized from the most basic form of a good to its most highly processed or assembled form

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Customs
Tariff classification – Harmonized System

Harmonized System notes
The Harmonized Commodity Description and Coding System Explanatory Notes – The E.N. represents the official interpretation of the WCO on the scope of each heading of the Harmonized System at the international level
The Harmonized System Compendium of Classification Opinions: This is a collection of decisions issued by the Harmonized System Committee. The decisions usually result from classification problems raised by or disputes between customs administrations
Local country rules of interpretation and notes
Many clients shipping goods into Dubai/UAE will rely on the notes of the sourcing/their Head Office jurisdiction because of the lack of information accessible on local interpretations

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Customs
Tariff classification – Harmonized System

Dubai Customs offers classification advice to importers/exporters
Before seeking a classification advice consider:
Merits of each position
The financial consequences of any incorrect classification
Whether any exemptions or restrictions apply to certain classifications
Weigh how the result of the advice will impact other products, other divisions, and past entries
Preferred classification advice can be difficult to obtain in Dubai

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Lecture 06
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Origin
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Origin
There are basically two types of origin for customs purposes, known as:
“preferential origin” and
“non-preferential origin”
Preferential origin generally leads to a reduced rate in customs duty, or a full customs duty exemption being applied. Free Trade Agreements (FTAs) establish ‘rules of origin’ which need to be met for a good to be deemed eligible for preferential origin treatment under the particular FTA
Preferential origin is much stricter and determines whether goods are entitled to special duty advantages arising from a particular trade agreement
‘Non-preferential origin’ is the country where an item is considered to have been manufactured or produced. It is more basic and is used to state where the goods were sourced or manufactured for more general customs purposes, such as the customs declaration, embargos, quotas, antidumping duties, and labeling

Sharjah university – Taxation & Zakat

Origin
It is the origin that is declared on the customs entry and may affect how a product is treated when imported into your market, for example:
Origin may determine whether ‘normal’ (as opposed to higher) duty amounts are payable under the WTO’s ‘most favored nation’ (MFN) tariff arrangements
Origin may also determine whether or not additional anti-dumping or countervailing duties are due on certain products
Origin can determine whether goods can be legally imported or whether they are from an embargoed country
Customs rules may also require you to place an origin label on imported merchandise – a failure to satisfy origin labeling rules can lead to additional penalties, forfeitures, and restrictions on customs entry
It is therefore very important to understand the various rules and requirements surrounding both preferential origin and non-preferential origin

Sharjah university – Taxation & Zakat

Free Trade Agreement
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Free Trade Agreements
A Free Trade Agreement (FTA) is an agreement between two or more countries to increase the flow of trade and services so as to bring about greater economic integration between them
FTAs seek to encourage and assist trade between the signatory countries through the requirement that their firms have preferential access to each others markets.
Examples of FTAs or similar agreements available to the UAE mainland importers:
GCC Customs Union
Greater Arab Free Trade Agreement (GAFTA)
GCC – Singapore FTA
GCC – EFTA (Iceland, Liechtenstein, Norway, and Switzerland) agreement
Free zones (including JAFZA) are not party to the FTAs implemented by the UAE

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GCC Customs Union
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Free Trade Agreements
GCC Customs Union
Article 9 of GCC Common Customs Law states that “goods imported into the country are subject to the customs taxes “duties” specified in the customs tariff, and the other applicable fees, excluding those exempted under the provisions of this regulation “law “or under the Unified Economic Agreement of the GCC Arab states or any other international agreement within the framework of the Council.”
In conjunction with Article 9 of GCC Common Customs Law, Article 2 of Chapter 1 – Unified Economic Agreement states “all agricultural, animal, industrial and natural resource products that are of national origin shall be exempted from reciprocal charges.”
Article 3(1) of the Unified Economic Agreement provides that “for products of national origin to qualify as national manufactured products, the value added ensuing from their production in Member States shall not be less than 40% of their final value as at the termination of the production phase.”
Article 3(2) regulates that “every item enjoying exemption hereby shall be accompanied by a certificate of origin duly authenticated by the appropriate government agency concerned.”

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Lecture 07
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Greater Arab Free Trade Area

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Free Trade Agreements
GAFTA
Sharjah university – Taxation & Zakat
The Greater Free Arab Trade Area agreement (“GAFTA”) was implemented by more than 20 Arab countries in 1998 to facilitate and develop trade among Arab states. The applicability of the agreement, however, varies amongst each member state
Under GAFTA agreement, goods that obtain origin within any of GAFTA member countries, should, conditionally, be eligible for preferential treatment upon importation into another GAFTA member country. Generally, this would mean that goods of “Arab” origin would be eligible for an exemption from customs duty upon importation into another GAFTA member country
In order to obtain origin and thereby preferential treatment under GAFTA in the country of importation, the following conditions should be met:

Free Trade Agreements
GAFTA
Sharjah university – Taxation & Zakat
Local value addition
Direct shipment
Invoicing
Certificate of Origin (COO)
KSACo
(Manufacturer)
Invoice
EgyptCo
(Customer)
Direct shipment to Egypt and COO
Flow of goods
Commercial invoice flow

The provisions in GAFTA state that in order for a good to be considered of Arab origin, the value added as a result of its production in a GAFTA country must not be less than 40% of the value of the finished goods
Due to the difficulties a GAFTA member country would have in monitoring the value added to goods within another GAFTA member country, members are obliged to rely on the certificate of origin issued by the competent authority in the Arab country of origin, as evidence that they are indeed wholly extracted/produced in that country, or that at least 40% value has been added locally
This means that GAFTA preferential treatment is only usually applied if the goods being imported into a GAFTA member country are accompanied by a COO issued in another GAFTA member country
Greater Arab Free Trade Area (GAFTA)
Conditions – Local value addition
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Direct shipment
Greater Arab Free Trade Area (GAFTA)
Challenges – Triangular transactions
UAECo
(Mediaiton)
Local value addition 40%
GermanCo
(Manufacturer)
Invoice 1
EgyptCo
(Customer)
Direct shipment of goods along with German COO
Invoice 2
GAFTA customs duty exemption benefits
Flow of goods
Commercial invoice flow
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Temporary Imports

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The GCC countries allow temporary imports, allowing the customs duty that would be due on the import to be suspended within the provisions of Article 89 and 90 of the GCC Common Customs Law
Importers must submit a deposit (generally permitted to be in the form of cash or a bank guarantee) to the customs authority for the amount of customs duty that would be payable had the goods been imported permanently
In addition, the reason for the temporary import will need to be demonstrated to the customs authority. For example, if the import is for an oil rig, the rig leasing company will submit their contract with the oil company for the lease of the rig to the customs authority
Upon submission of the deposit, the contract, and standard customs documentation (i.e., temporary import declaration, invoice, Certificate of Origin, Bill of Lading etc.), a temporary import permit will generally be issued for a specified period (in the GCC this is six months and may be renewable for subsequent six month periods up to three years)

Temporary Imports
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What are Incoterms?
Why are they important?
Which parties are involved in determining the incoterms?
Most favorable incoterms for buyer?
Most favorable incoterms for seller?

Incoterms
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Customs valuation

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Customs valuation
Sharjah university – Taxation & Zakat
Customs valuation is a customs procedure applied to determine the customs value of imported goods. If the customs duty rate is ad valorem, the customs value is essential to determine the duty to be paid on an imported good
Within the GCC region, generally ad valorem customs duty rates apply to imported goods. Any exceptions, such as specific duty rates that are based on weight or volume, are not expected to apply for the companies in normal course of business
Correct valuation of goods is therefore important, not only for compliance reasons, but also from a duty optimization perspective

Most local GCC countries’ legislation would equal the WTO valuation methods and its sequential application, barring interpretation or definition differences

About color themes
Choose the appropriate design theme for your presentation. The first two options on the design tab are correct EY themes, these two are the only ones that should be used. (1) light backgrounds for handouts; (2) dark backgrounds onscreen.
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Customs valuation
Price actually paid or payable
Sharjah university – Taxation & Zakat
Examples of elements to be included in the transaction value
Commissions and brokerage, except buying commission;
The cost of the containers which are treated as being one for customs purposes with the goods in question;
The cost of packing whether for labor or materials;
The value of the following goods and services (assists) provided by the buyer, directly or indirectly, free of charge or at a reduced cost, for its use in the production of the imported goods and sale thereof for export to the GCC States, provided that such value is properly apportioned:
materials, components, parts and similar items used in production of the imported goods;
tools, dies, molds and similar items used in production of the imported goods;
materials consumed in production of the imported goods; and
engineering, development, artwork, design work, and plans and sketches undertaken elsewhere than the GCC States, and necessary for the production of the imported goods.
royalty and license fees related to the goods being valued that the buyer must pay, either directly or indirectly, as a condition of sale of the goods being valued, to the extent that such royalties and fees are not included in the price actually paid or payable;
The value of any part of the proceeds from any subsequent resale, disposal or use of the imported goods that accrues directly or indirectly to the seller;
The cost of transport of the imported goods to the port or place of importation; and
Loading, unloading, handling and insurance costs associated with the transport of the imported goods to the port or place of importation.

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Customs valuation
Related party
Sharjah university – Taxation & Zakat
Establishing that a buyer and a seller are considered to be related parties, should not immediately lead to the transaction value being rejected. Instead, circumstances surrounding the sale should be examined in order to establish whether the relationship between the buyer and the seller has influenced the price (transaction value)
Based on WTO legislation, if the customs authorities has grounds for considering that the relationship influenced the price, it should communicate the grounds to the importer and must grant the importer a reasonable opportunity to respond. The transaction value between related parties should be accepted whenever the importer successfully demonstrates that the value closely approximates:
The transaction value in sales to unrelated buyers of identical or similar goods for export to the same country of importation; or
The customs value calculated based on the deductive method; or
The customs value calculated based on the computed method;
All while taking into account differences in commercial levels, quantity levels, packing, transport and insurance costs and all other costs which should have incurred by a buyer that is not related to a seller
Transfer pricing documentation may in some cases be used to support the abovementioned calculations, however, this cannot be considered officially accepted evidence

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Customs valuation
Related party
Sharjah university – Taxation & Zakat
Only if the importer is unsuccessful in demonstrating that the value was not influenced by the relationship between the buyer and the seller, the customs authority should reject the use of the transaction value method to calculate the customs value
Subsequently, the customs value of the goods should be calculated based on one of the other customs valuation methods in line of order. It is not allowed for the customs authority to amend the transaction value in order for it to be an acceptable customs value, without consulting whether one of the other customs valuation methods could be used to calculate the customs value first
Unfortunately, within the GCC practice, this methodology is not always consistently applied. Usually, a customs authority would be expected to accept the value that is invoiced by the seller, unless circumstances would give rise to suspecting the goods are seriously undervalued
If so, we understand from our experiences with the general practice that a customs authority would increase the value to an amount that would be acceptable from a customs perspective, rather than to (first) apply one of the other customs valuation methods in line of order. Although this new value would be presented to the importer to be accepted or not, the new value could only be challenged by taking the case to court, which we would generally not advise any business to do within the GCC region
As a result, we would recommend businesses importing goods into the GCC region to apply commercial values and retain sufficient documentation to support their customs value calculations, in order to provide as few occasion as possible to the customs authority to consider goods being undervalued and consequently to amend the customs value declared. EY would be able to assist in valuation manners prior and during discussions with any customs authority in the GCC region, including settlement advice

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Customs broker management

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Customs broker management
Sharjah university – Taxation & Zakat
In the UAE, generally, customs brokers and agents undertake the indispensable function of preparing and filing customs entry documentation
To enable these third parties to fulfill this function in a manner consistent with the UAE customs and trade compliance objectives, it is essential that brokers are always provided with the information they need to do their job
This means, in relation to each and every customs declaration they file on business’s behalf, brokers must have clear directions on key entry data such as:
Tariff classification
Product value
Customs regime to which the products are being imported
Country of origin
It is preferred best practice that brokers or agents should not determine these matters on Doka’s behalf but, rather, always follow clear instructions provided by the business unit in whose name the import declaration is being lodged

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Fines and Penalties
Sharjah university – Taxation & Zakat
Should the business be subjected to a customs audit, it will be requested to demonstrate the whereabouts of any goods it has imported into the free zone, for a specific period, by providing its inventory count
The UAE Customs will then compare the information provided to business inventory count with the import and export customs declarations that they have processed under their customs code for the same period
An inability to locate or trace goods may lead the UAE Customs to assume that the “missing goods” have entered the mainland UAE without following the necessary customs declaration formalities or that business is manipulating the quantities, weight or values o its imported and exported goods into and out of free zone
The UAE Customs may apply a 5% customs duty and potentially a 10% penalty on the value of the “missing goods” and may constitute this as “smuggling”. Irrespective of business intention, Customs authorities may also request an admission of guilt letter, confirming that they had in fact “smuggled” the goods

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Excise tax
Legislative framework
Sharjah university – Taxation & Zakat

Federal Decree-Law No. (7) of 2017 on Excise Tax was issued on 21 August 2017
Aided by the Cabinet decision No. (37) of 2017 on the Executive Regulation and the Cabinet decision no, (38) of 2017 made on 24th Sept 2017
Makes The Excise tax effective date from 1st Oct 2017
Key characteristics of Excise Tax
Imposed at specific rates on selective commodities
Indirect tax (incurred by the end consumer)
Collected once in the commercial chain from importers, manufacturers or producers of selective goods and stockpilers

Aided by the Cabinet decision No. (52) of 2019 made on 4th August 2019
Key characteristics of extended Excise Tax scope
Imposed at specific rates on selective commodities
Indirect tax (incurred by the end consumer)
Collected once in the commercial chain from importers, manufacturers or producers of selective goods and stockpilers

Carbonated drinks – 50%
Any aerated beverage except for unflavored aerated water
Any concentrate, powder, gel or extract intended to be made into an aerated beverage

Tobacco & Tobacco products – 100%

All items listed within Schedule 24 of the GCC Common Customs Tariff

Energy drinks – 100%
Any beverage which is marketed or sold as an energy drink, containing stimulant substances that provide mental and physical stimulation such as caffeine, taurine, ginseng and guarana.
Any concentrate, powder, gel or extract intended to be made into an energy drinks

Electronic smoking tools and liquids – 100%

Sweetened beverages – 50%

Stockpilers
The person who owns Excise Goods and cannot demonstrate that such goods had been previously subject to Excise tax
Can determine whether a business is a stockpiler by:
Calculating the average monthly sales of excise goods over 12 months prior to 1st of October 2017 and multiplying it by 2
Calculating the average monthly stock on hand of excise goods
This test should be done on SKU basis using the FTA product list as the basis
Valuation:
Price published by Federal Tax Authority standard price list; or
Retail sales price of the goods (less the excise tax applicable)
Producers
Importers
Stockpilers
Others involved

Tax calculation for including on a return to be done on the following dates:
Import – at the date of import of the excise goods
Manufacturer – at the date of production
Stockpiler – date of acquisition of the goods
Designated zone – date of release for consumption from the designated zone

Goods are released for consumption, when:
They are produced
They are released from a designated zone
Produced means:
Ready to held for retail sales
Ready / fit for consumption
Ready to be sold to a producer if required to be further combined with any other products to be made ready for consumption / sale

Manufacturer / Stockpiler
Levies Excise
If Manufacturer / Stockpiler doesn’t levy, any other would be responsible to assess for Excise
Ultimate burden is on Consumer

Sharjah university – Taxation & Zakat

Released from designated zone means:
Goods leave the designated zone
Consumed or bought for consumption from the zone or within zone
Irregularity in inter – zone transfers
Shortage during the inter – zone transfer, deficiency / shortage in a designated zone

Designated Zone
Consumed / Retail sale from Designated zone

Excise Tax will be applied to the Excise Price of the goods i.e. the tax base
The Excise Price will be the higher of:
The price published by the FTA in a standard price list; or
Designated Retail Sales Price of the goods, less the excise tax applicable
Carbonated Drinks
Tobacco & tobacco products

Energy Drinks

Energy Drinks
Sweetened beverages
Electronic smoking tools and liquids

Any area specified by the FTA
Located in a specific geographic area
Has security measures in place to restrict entry and exit of individuals and movement of goods to and from that area, according to conditions specified by the FTA
Has an appointed Warehouse Keeper
Type A
Type B
A fenced free zone or located within a fenced free zone
Has security measures in place to restrict entry and exit of individuals and movements of goods to & from the Designated Zone
Controlled & supervised by a Customs Authority
Has an appointed Warehouse Keeper

Number of declarations will be required to be filed in order to declare and pay excise tax. Declarations will be required in following situations:
Import of excise goods
Production of excise goods
Release of excise goods from a designated zone
Transfer of excise goods from a designated zone
Declarations

The excise tax return will be auto-populated based on the declarations submitted for that tax period.
All declarations must therefore be completed prior to submission of the tax return.
Deadline for submission of the tax return is the 15th day of the month following the end of the tax period.
Tax periods will normally be one calendar month in duration.
Payment is due by the 15th day following the end of the calendar month/tax period.
Tax Return

Importing goods
Brief about the declaration procedure
At or before the point of import, the importer will be required to file a declaration via the FTA portal declaring the imported goods
The designated retail selling price of the goods will be auto-populated on the declaration based on the product declared, and the tax liability will be automatically calculated
The filing of the declaration will generate a transaction ID
If the importer is registered for excise tax, the information from the declaration will flow through to the excise tax return at the end of the tax period – no payment will be required from the importer at the time of import
If the importer is excepted from registration, they will be required to pay the excise tax due on submission of the declaration
At the point of entry to the UAE, the importer must provide the transaction ID to the Customs Department
The customs department will verify the quantity of excise goods imported & where required, confirm payment has been made
The importer may file as many import declarations in a tax period as required

Refund claims- Special cases
Who can submit the refund claims?

Foreign governments, international organisations and diplomatic bodies and missions, on condition of reciprocity, for Excise Tax paid in the course of their official activities
A person who is registered in any GCC State who has paid Excise Tax in the UAE and then exported excise goods to another GCC State
Any other persons or categories determined by a Cabinet Decision
Refund claims can be made via the FTA online portal
Applicants will be required to complete an Excise Tax refund form & upload supporting evidence

Article 21, Federal Decree-Law No. (7) of 2017 on Excise Tax
The FTA may refund Excise Tax paid in certain cases on receipt of a refund application submitted by the following:

Warehouse keeper registration
Duties & responsibility of a warehouse keeper
Every designated zone must be supervised by a warehouse keeper
Specify the details of the designated zone(s) for which the warehouse keeper is responsible
Liable for the payment of Excise Tax due on release of goods stored within the designated zone
FTA may require a warehouse keeper to lodge a financial security, as part of the registration process
Provide details of the controls they have in place over the goods stored within the designated zone
E.g. details of the stock control system used, records of goods entering and leaving the designated zone, records of designated zone transfers, details of where these records will be kept etc.

Article 8, Federal Decree-Law No. (7) of 2017 on Excise Tax
Any person operating or intending to operate a designated zone shall apply for registration as a warehouse keeper

Warehouse keeper registration
A warehouse keeper is jointly and severally liable for payment of the Excise Tax due on release of goods stored within the designated zone

Provide
At least one of the Designated Zone registration form

Submit financial guarantee

Pay designated fees

Receive Registration Certificate
It is a combination of Warehouse keeper ID & Designated Zone ID

Sharjah university – Taxation & Zakat

Exception from Registration
For those who are not importing excise goods on a regular basis

Article 6, Federal Decree-Law No. (7) of 2017 on Excise Tax
A person will be excepted from registration under Article 6 of the Decree-Law where he can demonstrate to the FTA that he will not regularly import excise goods
Regular?

More often than once in a period not exceeding 6 calendar months
Less than four times in a 24-month period

Excise tax return filing & payment
Deadlines & penalty
Submission online
Tax period – 1 calendar month
Deadlines for submission and payment:
The due date for submission of the return will be 15 days following the end of the return period
The due date for payment will be 15 days following the end of the calendar month
Where the due date falls on a weekend or national holiday, the deadline shall be extended to the first following working day
Late submission or payment can result in a penalty levied by the FTA

Record-keeping
Records of Excise goods (manufactured, imported & exported), stock and tax dues

Article 24, Federal Decree-Law No. (7) of 2017 on Excise Tax
Specifies the following record keeping and evidential requirements:

Records of all
manufactured, imported or stockpiled Excise goods
Records of
exported excise goods and evidence of that export
Records of stock
levels, including details of items lost or destroyed
Tax due on excise goods imports, manufactured or stockpiled and deductible tax
Minimum
5 years?

Penalties
More about administrative penalties & tax evasion penalties

Administrative Penalties
Administrative penalties are intended to address non-compliance, and encourage compliance.
The FTA has the power to waive or reduce penalties at its discretion (e.g. taxable person has a reasonable excuse for the error).
Few examples of administrative violation:
The person conducting a business fails to keep the required records and other information;
The person conducting a business fails to submit the data, records and documents related to tax in Arabic language when requested by FTA;
The taxable person fails to submit a registration application within the period required.
Not less than 500 dirham and not more than 3 times the amount of tax for which the penalty was levied

Tax Evasion Penalties
Courts will issue penalties for tax evasion.
Tax evasion is where a person uses illegal means to either lower the tax or not pay the tax due, or to obtain a refund to which he is not entitled under law.
The imposition of a penalty under tax law does not prevent other penalties being issued under other laws.
Few examples of instances of tax evasion:
Where a person deliberately provides false information and data and incorrect documents to the FTA;
Where a person deliberately conceals or destroys documents or other material that he is required to maintain and provide to the FTA.
Up to five times the relevant tax at stake and a prison sentence

Audits
Detailed auditing process of FTA

FTA will apply risk based selection criteria to determine whom to audit

FTA will usually conduct the audit at the person’s place of business or at the FTA offices

If audit at the person’s place, must be informed at least 5 business days prior to
the audit

FTA can close
the place of business for up to 72 hours (e.g. suspect tax evasion)

FTA officer may request original records, merchandise samples, mark inspected assets

The FTA may also remove records, documents and samples

The audited person should be notified the tax audit results within 10 business days after the audit

Key takeaways
Excise tax in the UAE
Calculation
Excise Tax will be applied to the Excise Price of the goods i.e. the tax base
The Excise Price will be the higher of:
The price published by the FTA in a standard price list; or
Designated Retail Sales Price of the goods, less the excise tax applicable

Declarations to be filed
Import of excise goods
Production of excise goods
Release of excise goods from a designated zone
Transfer of excise goods from a designated zone
Deductible tax
Excise tax return submission
Details provided in the declaration part will auto-populate as the tax liability
Taxable person should validate the information before submission
At least declaration should be submitted prior to the submission of return
Finally, submit the excise tax return and complete payment of the tax liability due by the filing
Return filing & payment
Online declaration & return submission
Tax period- One calendar month
Deadline: 15 days following end of tax return period
Online payment no later than the 15th day following the end of a calendar month
Penalty for late submission & payment
Scope of excise tax
Carbonated drinks (Inc. Gels, concentrates)
Energy drinks (Inc. Gels, concentrates)
Tobacco & Tobacco products
Sweetened beverages
Electronic smoking tools and liquids
Sharjah university – Taxation & Zakat

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Sharjah university – Taxation & Zakat

Value Added Tax
VAT is used in more than 180 countries around the world. All OECD countries except for the US have VAT (or a variation). While it feels exactly the same as a general sales tax to end-consumers, VAT is a more sophisticated tax and overcomes many challenges that affect the general sales tax.
VAT is a transaction-based indirect tax which is levied at each step of the supply chain. End consumers generally bear the VAT cost while registered businesses collect and account for the tax, in a way acting as a tax collector on behalf of the Federal Tax Authority.
VAT was introduced in the UAE on 1 January 2018. The rate of VAT is 5 per cent. VAT will provide the UAE with a new source of income which will be continued to be utilized to provide high-quality public services. It will also help government move towards its vision of reducing dependence on oil and other hydrocarbons as a source of revenue

Value Added Tax in the UAE
Relevant Law
UAE Cabinet issued Decree No. (52) of the year 2017 concerning the executive regulation of the Federal Law No. 8 of 2017 on value added tax, which outlines supply of goods and services in all cases, including supply in special cases, supply of more than one component and exemption related to legal supply. The regulation also defines the mandatory, optional tax registration or that liable to exceptions, tax group, as well as deregistration.
The regulations set out the rules with regards to supplies, taxes due on the date of purchase and the place of supply of goods such as real estate services, transport services, telecommunications services and electronic services, as well as profit margins and calculating and charging tax based on the profit margin earned. The executive regulations shall specify the exempted supplies, tax treatment of financial services, calculation of tax on specific supplies, calculation of income tax payable, the non-refundable input tax and the method of dividing input tax.
The law also summarizes the capital assets scheme, adjustment of tax after the supply date, tax invoice, tax credit notes, tax period, tax returns and reclaiming of tax as well as carrying forward the excess of recoverable tax and tax recovery. The law also stipulates the provisions of tax recovery, violations and penalties, tax evasion in addition to general provisions and closing provision. The decree was published in the Official Gazette and came into effect as of January, 1st 2018.

Value Added Tax in the UAE
Input and Output tax
Input VAT is the value added tax added to the price when you purchase goods or services that are liable to VAT. If the person or businesses that is buying is registered for VAT they can deduct the amount of VAT paid from his/her settlement with the tax authorities
Output VAT is the value added tax you charge on your own sales of goods and services both to other businesses and to ordinary consumers. When your business is registered for VAT, you need to add VAT to each VAT-able item on each of your sales invoices.
VAT on sales between businesses must be specified in a sales document which is a business document that relate to sales of goods and services. They consist of invoices, notes, bills and receipts issued by the seller, as well as contract notes and settlement notes.

Value Added Tax in the UAE
Input and Output tax – Example
Input VAT is the value added tax added to the price when you purchase goods or services that are liable to VAT. If the person or businesses that is buying is registered for VAT they can deduct the amount of VAT paid from his/her settlement with the tax authorities
During a VAT period, Shop A (which is registered in the VAT Register) purchases goods for AED 62,000 including VAT (5% Rate)
The input VAT is AED 3,100.
During the same period, the business sells goods for AED150,000 excl. VAT as they are not registered.
The output VAT is AED 7,500
In the VAT settlement, you deduct output VAT from input VAT which comes to AED 4,400.
The resulting amount must be reported to your regional tax office.
If your purchases exceed your sales in any one period, the difference will be negative, and the difference will naturally be refunded.

Value Added Tax in the UAE
VAT treatment on selected industries

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Sharjah university – Taxation & Zakat

Value Added Tax in the UAE
VAT treatment on selected industries

Value Added Tax in the UAE
Should business be registered for VAT?
If your taxable turnover – the value of the goods and services that you supply and any imports, but excluding any exempt supplies (e.g. certain financial services and life insurance, some property transactions and local passenger transport) – exceeds AED 375,000 in a 12 month period, or if you expect your taxable turnover to exceed AED 375,000 in the next 30 days, you are required to register for VAT.
If your taxable turnover, or expenses which you incur that are subject to VAT, is less than AED 375,000, but more than AED 187,500, you can register for VAT voluntarily.

Businesses will normally be allocated a quarterly or monthly tax period according to your annual turnover, but the FTA may allow a shorter or longer tax period if it considers that to be appropriate. Businesses will be required to file the tax return for each tax period by the 28th day of the month following the end of it (or on the next working day if the normal due date falls on a national holiday or weekend). Tax returns will be filed electronically through the FTA portal. On each return, you will need to show:
• The value of standard-rated supplies made in the tax period and the output tax charged, per Emirate.
• The value of zero-rated supplies made in the tax period.
• The value of exempt supplies made in the tax period.

There are a number of payment mechanisms that are available to make a payment of any tax to the FTA, via e-Dirham. If you do not have an e-Dirham account please apply for one as early as possible. More information is available on the e-Dirham website.

In addition, you will need to keep a VAT record or account which shows:
output tax due on taxable supplies
output tax due on taxable supplies accounted for via the reverse charge mechanism;
output tax due after the correction any errors or adjustments;
input tax recoverable on supplies or imports; and
input tax recoverable after the correction of any errors or adjustments
Value Added Tax in the UAE
Record keeping
Records need to be kept for at least 5 years. You will have to keep:
records of all supplies and imports of goods and services;
all tax invoices and tax credit notes and alternative documents received;
all tax invoices and tax credit notes and alternative documents issued;
records of goods and services that have been disposed of or used for matters not related to the business, detailing the VAT paid on those goods and services;
records of goods and services purchased for which the input tax was not deducted;
records of exported goods and services; and
records of adjustments or corrections made to accounts or tax invoices

Value Added Tax in the UAE
Moreover, like all businesses, you will have to keep accounting records and documents that relate to your business activities. Such records and documents, include:
balance sheet and profit and loss accounts;
records of wages and salaries;
records of fixed assets;
inventory records and statements (including quantities and values) at the end of any relevant tax period and all records of stock-counts related to inventory statements.

Value Added Tax in the UAE
Zero rated and exempt supplies

Do I need to file returns if I only supply zero-rated supplies?
If you do not qualify for an exception from registration, then you must file tax returns with the FTA. You will also be entitled to recover input tax incurred on business purchases subject to the normal conditions.
What are zero-rated supplies?
Supplies subject to the zero rate are listed in Article 45 of the Federal Decree-Law no. (8) of 2017 on Value Added Tax, such as:
Value Added Tax in the UAE
Zero rated and exempt supplies
However, you can ask for an exception from registration if, and only if, you do not make any other supplies which are taxable at the standard rate of 5%. If exception from registration is granted, then you will not submit regular tax returns and you will not be able to recover input tax incurred.

Who are suppliers of zero-rated supplies?
Registrants who could be suppliers of zero-rated services and goods include exporters, real estate developers, airlines, schools, clinics, hospitals, etc.
Value Added Tax in the UAE
Zero rated and exempt supplies
Exports of goods and services.
International transport of goods and passengers.
Certain means of transport, such as trains, trams, vessels, airplanes.
First sale/rent of residential buildings.
Aircraft or vessels designated for rescue and assistance by air or sea.
Certain investment precious metals.
Certain healthcare services and related goods and services.
Certain educational services and related goods and services.

Taxation and Zakat
University of Sharjah
Dr. Atia Hussain

Jan – May

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Course Program

Section

Week 1 (19 Jan): Introduction to Taxation & Zakat

Week 2 (26 Jan): Indirect tax – Customs

Week 3 (2 Feb): Indirect tax – Customs

Week 4 (9 Feb): Indirect tax – Customs

Week 5 (16 Feb): Indirect tax – Excise (18 Feb no lecture)

Week 6 (23 Feb): Indirect tax – Excise

Week 7 (1 Mar): Indirect tax – Conclusion and guest speaker

Week 8 (8-18 March Mid term exam)

Week 10 (22 Mar): Indirect tax – VAT

Week 11 (29 Mar): Indirect tax – VAT

Sharjah university – Taxation & Zakat

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22 April 2020
Page 1

Sharjah university – Taxation & Zakat

22 April 2020
Page 2

Lecture 01

22 April 2020
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Introduction to Taxation and Zakat in the
United Arab Emirates (UAE)
Zakat
Tax
Direct tax
Indirect tax
Corporate Income tax
Personal Income tax
Customs duty
Value Added Tax (VAT)
Excise tax

Sharjah university – Taxation & Zakat

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Sharjah university – Taxation & Zakat

Introduction to Taxation and Zakat in the UAE
Basic structure/definitions
Zakat
Religious mode
Annual payments
Property/cash/gold
Rate: 2.5%

Sharjah university – Taxation & Zakat

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Lecture 02 and 03
Page 8

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GCC Customs Union
Referred Law/tariff book/Free Trade Agreement

Sharjah university – Taxation & Zakat

GCC Customs Union
Referred Law/tariff book/Free Trade Agreement

Sharjah university – Taxation & Zakat

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Sharjah university – Taxation & Zakat

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GCC Customs Union

Sharjah university – Taxation & Zakat

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Sharjah university – Taxation & Zakat

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UAE free zones customs regime
Example: Jebel Ali Free Zone Area (JAFZA)
All materials, products and equipment brought into JAFZA…
…are entering a duty free zone

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Lecture 04
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Basics in Global Trade
Sample Certificate of origin
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Basics in Global Trade
Sample customs declaration/Bayan/Bill of entry
Sharjah university – Taxation & Zakat

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Basics
Customs topics
Tariff classification
Origin of goods
Incoterms
Customs valuation
Temporary imports
Free Tarde Agreements
GCC free trade agreement
Greater Arab Free Trade Agreement

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Lecture 05
Sharjah university – Taxation & Zakat

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Tariff Classification
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Customs
Tariff classification – why it is important

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Customs
Tariff classification – who is responsible

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Customs
Tariff classification – Harmonized System

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Customs
Tariff classification – Harmonized System

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Customs
Tariff classification – Harmonized System

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Customs
Tariff classification – Harmonized System

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Lecture 06
Sharjah university – Taxation & Zakat

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Origin
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Sharjah university – Taxation & Zakat

Free Trade Agreement
Sharjah university – Taxation & Zakat

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Sharjah university – Taxation & Zakat

GCC Customs Union
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Sharjah university – Taxation & Zakat

Lecture 07
Sharjah university – Taxation & Zakat

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Greater Arab Free Trade Area

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Temporary Imports

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Temporary Imports
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What are Incoterms?
Why are they important?
Which parties are involved in determining the incoterms?
Most favorable incoterms for buyer?
Most favorable incoterms for seller?

Incoterms
Sharjah university – Taxation & Zakat

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Customs valuation

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Most local GCC countries’ legislation would equal the WTO valuation methods and its sequential application, barring interpretation or definition differences

About color themes
Choose the appropriate design theme for your presentation. The first two options on the design tab are correct EY themes, these two are the only ones that should be used. (1) light backgrounds for handouts; (2) dark backgrounds onscreen.
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Customs valuation
Related party
Sharjah university – Taxation & Zakat
Establishing that a buyer and a seller are considered to be related parties, should not immediately lead to the transaction value being rejected. Instead, circumstances surrounding the sale should be examined in order to establish whether the relationship between the buyer and the seller has influenced the price (transaction value)
Based on WTO legislation, if the customs authorities has grounds for considering that the relationship influenced the price, it should communicate the grounds to the importer and must grant the importer a reasonable opportunity to respond. The transaction value between related parties should be accepted whenever the importer successfully demonstrates that the value closely approximates:
The transaction value in sales to unrelated buyers of identical or similar goods for export to the same country of importation; or
The customs value calculated based on the deductive method; or
The customs value calculated based on the computed method;
All while taking into account differences in commercial levels, quantity levels, packing, transport and insurance costs and all other costs which should have incurred by a buyer that is not related to a seller
Transfer pricing documentation may in some cases be used to support the abovementioned calculations, however, this cannot be considered officially accepted evidence

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Customs valuation
Related party
Sharjah university – Taxation & Zakat
Only if the importer is unsuccessful in demonstrating that the value was not influenced by the relationship between the buyer and the seller, the customs authority should reject the use of the transaction value method to calculate the customs value
Subsequently, the customs value of the goods should be calculated based on one of the other customs valuation methods in line of order. It is not allowed for the customs authority to amend the transaction value in order for it to be an acceptable customs value, without consulting whether one of the other customs valuation methods could be used to calculate the customs value first
Unfortunately, within the GCC practice, this methodology is not always consistently applied. Usually, a customs authority would be expected to accept the value that is invoiced by the seller, unless circumstances would give rise to suspecting the goods are seriously undervalued
If so, we understand from our experiences with the general practice that a customs authority would increase the value to an amount that would be acceptable from a customs perspective, rather than to (first) apply one of the other customs valuation methods in line of order. Although this new value would be presented to the importer to be accepted or not, the new value could only be challenged by taking the case to court, which we would generally not advise any business to do within the GCC region
As a result, we would recommend businesses importing goods into the GCC region to apply commercial values and retain sufficient documentation to support their customs value calculations, in order to provide as few occasion as possible to the customs authority to consider goods being undervalued and consequently to amend the customs value declared. EY would be able to assist in valuation manners prior and during discussions with any customs authority in the GCC region, including settlement advice

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Customs broker management

22 April 2020
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22 April 2020
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22 April 2020
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Excise tax
Legislative framework
Sharjah university – Taxation & Zakat

Carbonated drinks – 50%
Any aerated beverage except for unflavored aerated water
Any concentrate, powder, gel or extract intended to be made into an aerated beverage

Tobacco & Tobacco products – 100%

All items listed within Schedule 24 of the GCC Common Customs Tariff

Electronic smoking tools and liquids – 100%

Sweetened beverages – 50%

Manufacturer / Stockpiler
Levies Excise
If Manufacturer / Stockpiler doesn’t levy, any other would be responsible to assess for Excise
Ultimate burden is on Consumer

Sharjah university – Taxation & Zakat

Designated Zone
Consumed / Retail sale from Designated zone

Energy Drinks

Energy Drinks
Sweetened beverages
Electronic smoking tools and liquids

Refund claims- Special cases
Who can submit the refund claims?

Article 21, Federal Decree-Law No. (7) of 2017 on Excise Tax
The FTA may refund Excise Tax paid in certain cases on receipt of a refund application submitted by the following:

Article 8, Federal Decree-Law No. (7) of 2017 on Excise Tax
Any person operating or intending to operate a designated zone shall apply for registration as a warehouse keeper

Warehouse keeper registration
A warehouse keeper is jointly and severally liable for payment of the Excise Tax due on release of goods stored within the designated zone

Provide
At least one of the Designated Zone registration form

Submit financial guarantee

Pay designated fees

Receive Registration Certificate
It is a combination of Warehouse keeper ID & Designated Zone ID

Sharjah university – Taxation & Zakat

Exception from Registration
For those who are not importing excise goods on a regular basis

More often than once in a period not exceeding 6 calendar months
Less than four times in a 24-month period

Record-keeping
Records of Excise goods (manufactured, imported & exported), stock and tax dues

Article 24, Federal Decree-Law No. (7) of 2017 on Excise Tax
Specifies the following record keeping and evidential requirements:

Penalties
More about administrative penalties & tax evasion penalties

Audits
Detailed auditing process of FTA

FTA will apply risk based selection criteria to determine whom to audit

FTA will usually conduct the audit at the person’s place of business or at the FTA offices

If audit at the person’s place, must be informed at least 5 business days prior to
the audit

FTA can close
the place of business for up to 72 hours (e.g. suspect tax evasion)

FTA officer may request original records, merchandise samples, mark inspected assets

The FTA may also remove records, documents and samples

The audited person should be notified the tax audit results within 10 business days after the audit

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Sharjah university – Taxation & Zakat

Value Added Tax in the UAE
VAT treatment on selected industries

22 April 2020
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Sharjah university – Taxation & Zakat

Value Added Tax in the UAE
VAT treatment on selected industries

Value Added Tax in the UAE
Zero rated and exempt supplies

Value Added Tax in the UAE
Zero rated and exempt supplies
If the business makes exempt supplies, does it need to register?
If all the supplies business make are exempt, it does not have to register
for VAT. In such a case, it cannot recover tax incurred on business
purchases. Examples of such would be owners of property who rent their
properties for residential purposes.

Value Added Tax in the UAE
Reverse charge mechanism
What is Reverse charge mechanism?
It is a mechanism by which the taxable customer is obligated to pay the tax due on behalf of the supplier and is liable for all obligations provided for in the Agreement and the Local Law”. The Reverse charge mechanism is a concept applicable, but not limited, to the following cases:

Receipt of goods or services from a person residing in another state or outside the GCC
Importation of goods into a member state

Outside UAE
Supplier located outside UAE does not charges VAT
The customer self account for 5% VAT (reverse charge) and reclaims same VAT
Services
Import scenario
UAE
1 The output VAT required to be disclosed in customer’s VAT return in respect to this transaction
2 The input VAT can be recovered according to the normal recovery rules

Outside UAE
Supplier located outside UAE does not charge VAT
The customer will pay import VAT and reclaims same VAT
Goods
Import scenario
UAE

The customer purchases goods from supplier located outside UAE
The supplier does not charge VAT on its invoice
The customer will pay import VAT at customs
The value of imported goods shall be their customs value determined in accordance with the Customs Law, plus excise tax, customs duty and any other charges, excluding VAT
Assume: Customs Value is AED 100,000 and excise tax and other charges do not apply, then:
Customs Duty payable = 5% of AED 100,000 = AED 5,000
Import VAT = 5% of AED 105,000 = AED 5,250
Import VAT can be recovered on the customer’s VAT return (subject to the normal VAT recovery rules)

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134

Time of supply
Basic tax point
What is a tax point?
It is the time of supply for VAT purposes:
It determines when output tax is liable
It determines when input tax is recoverable
It is used in calculating penalties and interest by the Tax Authorities

Page ‹#›
Invoice
Payment
Performance Based
Where services are provided
Date on which services are provided to the recipient
Date on which supplier issues a tax invoice
Date on which supplier receives payment with respect to supply
Date on which performance is completed

Time of Supply for Services
Time of Supply is earlier of the following

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2018
Go live date
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec

Contract signed
Supply
Invoice
Payment
Tax point – VAT is due
Time of supply – illustration
Basic rules

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137

Time of supply
Continuous supply

Transactions that result in issuance of invoices or related payments in a successive manner
Time of supply shall be considered earlier of the following events:
Date of invoice
Date of Payment receipt
12 months from completion of service

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138

Advance
tax point
Standard
tax point
Deferred
tax point
Receipt of payment in advance
A date no later than 12 months after the date of the provision of goods/ services.
Date of issuance of tax invoice; or
Due date of payment as stated on tax invoice
Time of Supply – Continuous Supply

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Time of supply – illustration
Continuous supply
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Contract signed

Bill issued for Q1
Tax point 1
Payment is made for Q2

Tax point 2
Payment is made for Q1
Bill issued for Q2

2018
Go live date

Page ‹#›
Place of Supply for Goods
Place of supply is the place where the supply is considered to have taken place. The place of supply determines whether tax is applicable on the supply or not.
Supply of goods can be divided into 3 categories for determining the place of supply:
Domestic supplies
Exports
Imports

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Place of Supply for Goods
Domestic supplies
The place of supply of domestic supplies, i.e. goods which are supplied to a recipient within UAE, will be UAE. Hence, UAE VAT will be applicable on the supply.
Example:
Delta & Co, a registered dealer in Dubai supplies 100 monitors @ AED 500 to a registered dealer, Hakim Electronics, in Sharjah.
Here, since the recipient is located in UAE, the place of supply is UAE. Under UAE VAT, this is a taxable supply, attracting levy of 5% VAT. Hence, UAE VAT @ 5% should be levied on the supply.

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Place of Supply for Goods
Imports
When goods are imported into UAE from a place outside the UAE, the place of supply will be UAE. Hence, UAE VAT will be applicable on the supply.
Example:
Delta & Co, a registered dealer in Dubai, purchases 50 mobile phones @ AED 1,500 from Xing & Co, a firm in China.
Here, Delta & Co import goods into UAE from China. The place of supply will be UAE and UAE VAT is applicable on the supply. Delta & Co has to pay VAT @ 5% on reverse charge basis on the import. Hence, place of supply is an important factor for determining the tax to be levied on a supply

Page ‹#›

Place of Supply for Goods
Exports
The place of supply in case of exports can be divided into 2 categories:
Exports outside the GCC

Exports to GCC member States
The export invoices would be zero rates regardless of place of supply of goods.

Page ‹#›

Supply without import or export
Place of supply is the UAE
Export of goods outside the UAE/ GCC
Place of supply is the UAE
Intra- GCC movement to unregistered customers in another implementing state
Place of supply is the UAE
Intra-GCC movement to registered customers in another implementing state
Place where the goods are finally sent

Place of Supply for Goods

Page ‹#›

Real Estate & Real Estate related service
Educational /Sporting/ Training services
Location of Immovable property
Place of performance
Services received from non-resident service providers
Goods transport
Passenger transport
Telecommunication & Electronic Services
Place where the transportation started
Place where the transportation started
Place of Actual Use

Restaurant/ Hotel Services
Lease of a means of transport
Place of performance
Place where the means of transport was made available

Services not covered specifically
Suppliers place of residence
Place of residence of the recipient
Services to registered customers in another implementing state
Customer’s place of residence
Place of Supply for Services

Page ‹#›

Where the entire consideration is monetary, value of supply equals consideration less tax
Where the consideration is part monetary, value of supply equals monetary part of the consideration in addition to the market value of the non-monetary part of the consideration

Value of Supply
General Cases
Value of imported goods equals the customs value in addition to custom duty and excise
Value of imported services equals the market value of the services received

Imports

Page ‹#›

Value of supply is consideration received less tax
Value of supply is market value, if value of the supply is less than market value and the recipient is not entitled to fully recover the VAT that would have been charged on such supplies

Value of Supply
Value of Supply for Related Parties

Page ‹#›

Inputs include:
Goods or services acquired domestically
Goods or services acquired from within the GCC
Goods or services imported from outside the GCC
Input tax paid on procurements in relation to zero rated supplies/ out of scope supplies – available

Input tax paid on procurements in relation to exempted supplies – restricted

VAT is generally recoverable on any inputs (purchases and expenses) incurred in relation to a taxable business activity
Partial
Input tax
attributable
to taxable
supplies
Input tax
relating to
both taxable
and exempt
supplies
All
None
Input tax
attributable
to exempt
supplies
Overview of Input Tax Credit

Page ‹#›

Conditions for recovery of input tax credit
Goods or services procured in relation to taxable supplies or supplies that would have been taxable if provided in the UAE
Compliant tax invoice is received and retained;
Consideration for such supplies is paid within 6 months from the agreed date of payment;
Input tax is recovered in the tax period in which the tax invoice was received, or the subsequent period.

Output tax > Input tax = Net tax payable
Output tax < Input tax = Differential input tax refund Conditions for Recovery of Input Tax Credit Page ‹#› Entertainment Provision of entertainment services by a non-government entity to anyone not employed by that person. This would include customers, potential customers, officials, shareholders and investors Entertainment has been defined as hospitality of any kind, including the provision of accommodation, food and drinks which are not provided in the normal course of a meeting, access to shows or events, or trips provided for the purposes of pleasure or entertainment Non-recoverable Input Tax Renting of Motor Vehicles Personal benefit provided to employees Where a car was purchases, leased, rented for use in the business but was also available for personal use Where goods or services are purchased for the personal benefit of employees and such services do not fall under the following: Supply of such goods and services are treated as a deemed supply; The employer is under a legal obligation to provide such goods or services; The employer is contractually obligated to provide such goods or services to enable employees to perform their role, and its proven to be normal business practice. Page ‹#› Medical Insurance for employees Non-recoverable Input Tax Car provided to Directors of the Company Iftar Dinner Medical insurance for family members of the Managing Director Hotel accommodation for new employees Real estate brokerage reimbursed to employees Etisalat bills which cover 51% business and 49% personal calls Tea, coffee during this training Delivery truck for delivery of goods Children's Education DEWA bills reimbursed to employees Long term accommodation provided as per contract Annual day Office car used only for meetings Visa expenses for spouse Medical insurance for Emirati employees Page ‹#› VAT on transitional provisions Illustration Scenario 1 2 3 Supply made before implementation date Supply made after implementation date Continuous supply Supply of goods P P Supply of services P P Importation of goods P Invoice issued P Receipt of payment P Supply of goods P P Supply of services P P Importation of goods P Invoice issued P P Receipt of payment P P Will VAT apply O P P VAT treatment No VAT shall be charged on supply of goods and services VAT shall be charged on supply of goods and services VAT charged only on value of goods and services provided after the implementation date VAT Implementation date Page ‹#› 153 Tax invoice and its importance for recovery Tax invoice contents The words “Tax Invoice” clearly displayed Supplier’s name Supplier’s address Supplier’s VAT number Customer’s name Customer’s address Date of issuance of the tax invoice Date of supply (where different to date of issuance) Date of payment (where different to date of issuance) Sequential invoice number Description of the goods or services supplied Quantity of goods supplied Unit price, exclusive of VAT, in AED Value of discounts, if any, in AED Value of supply, exclusive of VAT, in AED VAT rate applied The exchange rate applied where a currency other than AED is used In order for the business to recover the input VAT, it should receive a compliant tax invoice that includes the minimum tax invoice requirements. Otherwise, if the tax invoice is not compliant, then input VAT shall not be recovered. Where the business is obliged to pay Tax through the reverse charge mechanism, it shall record the Tax amount due in AED in respect of the transaction on the invoice issued by the supplier residing outside the UAE. About color themes Choose the appropriate design theme for your presentation. The first two options on the design tab are correct EY themes, these two are the only ones that should be used. (1) light backgrounds for handouts; (2) dark backgrounds onscreen. 1 ! 2 154 The UAE Central Bank started publishing daily exchange rates on the UAE Central Bank website - https://www.centralbank.ae/en/ from 17 May 2018 The FTA also published a public clarification on the use of exchange rates for VAT purposes which states that where a supply was made in a currency other than UAE Dirham, then the amount stated on the issued tax invoice should be converted into the UAE Dirham according to the exchange rate approved by the UAE Central Bank as on the date of supply. Moreover, in the case of imported services which are subject to VAT under the reverse charge mechanism, the clarification states that it is acceptable to use the date of the invoice as the relevant date for the purpose of conversion. Use of Exchange Rates Page ‹#› Direct tax - Corporate Income Tax (CIT)

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Corporate income tax – a type of direct tax
An assessment levied by a government on the profits of a company. The rate of corporate income tax paid by a business varies between countries, although since corporations are legal entities distinct from their owners and operators, they are typically taxed as if they were people.

Corporate Income Tax

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There is currently no federal direct UAE taxation. Each of the individual Emirates have issued corporate tax decrees, which theoretically apply to all businesses established in the UAE.
Under the Emirate-based tax decrees, CIT may be imposed on all companies (including branches and permanent establishments [PEs]) at rates of up to 55%.
However, in practice, these laws have not been applied.
Taxes are currently only imposed at the Emirate level on the following:
Oil and gas exploitation and production companies (oil and hydrocarbon companies with actual production in the UAE) as per specific government concession agreements (which are usually confidential);
Branches of foreign banks under specific tax decrees or regulations or fixed in agreements with the Rulers of the Emirates in which the branches operate (up to the rate of 20%)
Only the above tax-paying entities are required to register with the tax authorities and file tax returns. Note that this is merely how the practice has evolved in the UAE and at the level of the individual Emirates. There is no general exemption in the Emirates’ tax decree. Anyone investing in the Emirates should be aware of the risk that the tax decree may be more generally applied in the relevant Emirate in the future, of the remote risk that it may be applied retroactively, and be mindful of the potential introduction of federal (UAE) level taxation in the medium to long term.
The income tax decrees which have been enacted in each Emirate provide for tax to be imposed on the taxable income of all corporate entities wherever incorporated, and their branches which carry on trade or business, at any time during the taxable year through a permanent establishment in the relevant Emirates. Corporate entities are taxed if they carry on trade or business directly in the Emirate or indirectly through the agency of another corporate entity.
Businesses registered in the free zones are exempt from corporate tax for certain time and such time can be extended. Rules and regulations of independent free zones apply.

Corporate Income Tax in the UAE

Corporate Income Tax in the UAE
In August 2015, the UAE Ministry of Finance (MoF) announced the potential introduction of corporate tax in the UAE. No further details have been provided with respect to the proposed tax rate or timeline. The MoF stated that after an announcement has been made that the draft law has been finalized, it will be at least 12 months before businesses will be required to fulfill their UAE corporate tax obligations. This will allow businesses to prepare for the implementation of the corporate tax.
It is recommended that businesses closely follow developments and announcements from the MoF to be prepared for the possible financial and administrative consequences of CIT introduction in the UAE.

22 April 2020
Page 160

Zakat

Taxation and Zakat
University of Sharjah
Dr. Atia Hussain

Jan – May

About color themes

Choose the appropriate design theme for your presentation. The first two options on the design tab are correct EY themes, these two are the only ones that should be used. (

) light backgrounds for handouts; (2) dark backgrounds onscreen.

Course Program

Section

Week 1 (19 Jan): Introduction to Taxation & Zakat

Week 2 (26 Jan): Indirect tax – Customs

Week 3 (2 Feb): Indirect tax – Customs

Week 4 (9 Feb): Indirect tax – Customs

Week 5 (16 Feb): Indirect tax – Excise (18 Feb no lecture)

Week 6 (23 Feb): Indirect tax – Excise

Week 7 (1 Mar): Indirect tax – Conclusion and guest speaker

Week 8 (8-18 March Mid term exam)

Week 10 (22 Mar): Indirect tax – VAT

Week 11 (29 Mar): Indirect tax – VAT

Sharjah university – Taxation & Zakat

About color themes

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!
2

19 April 2020
Page 1

Sharjah university – Taxation & Zakat

19 April 2020
Page 2

Lecture 01

19 April 2020
Page 3

Introduction to Taxation and Zakat in the
United Arab Emirates (UAE)
Zakat
Tax
Direct tax
Indirect tax
Corporate Income tax
Personal Income tax
Customs duty
Value Added Tax (VAT)
Excise tax

Sharjah university – Taxation & Zakat

19 April 2020
Page 4

Sharjah university – Taxation & Zakat

Introduction to Taxation and Zakat in the UAE
Basic structure/definitions
Zakat
Religious mode
Annual payments
Property/cash/gold
Rate: 2.5%

Sharjah university – Taxation & Zakat

19 April 2020
Page 7

Lecture 02 and 03
Page 8

19 April 2020
Page 8

GCC Customs Union
Referred Law/tariff book/Free Trade Agreement

Sharjah university – Taxation & Zakat

GCC Customs Union
Referred Law/tariff book/Free Trade Agreement

Sharjah university – Taxation & Zakat

19 April 2020
Page 10

Sharjah university – Taxation & Zakat

19 April 2020
Page 11

GCC Customs Union

Sharjah university – Taxation & Zakat

19 April 2020
Page 12

Sharjah university – Taxation & Zakat

19 April 2020
Page 14

UAE free zones customs regime
Example: Jebel Ali Free Zone Area (JAFZA)
All materials, products and equipment brought into JAFZA…
…are entering a duty free zone

Sharjah university – Taxation & Zakat

19 April 2020
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Sharjah university – Taxation & Zakat

19 April 2020
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Sharjah university – Taxation & Zakat

Lecture 04
Sharjah university – Taxation & Zakat

19 April 2020
Page 18

Sharjah university – Taxation & Zakat

19 April 2020
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19 April 2020
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Basics in Global Trade
Sample Certificate of origin
Sharjah university – Taxation & Zakat

19 April 2020
Page 23

Basics in Global Trade
Sample customs declaration/Bayan/Bill of entry
Sharjah university – Taxation & Zakat

19 April 2020
Page 24

Basics
Customs topics
Tariff classification
Origin of goods
Incoterms
Customs valuation
Temporary imports
Free Tarde Agreements
GCC free trade agreement
Greater Arab Free Trade Agreement

Sharjah university – Taxation & Zakat

19 April 2020
Page 25

Lecture 05
Sharjah university – Taxation & Zakat

19 April 2020
Page 26

Tariff Classification
Sharjah university – Taxation & Zakat

19 April 2020
Page 27

Customs
Tariff classification – why it is important

Sharjah university – Taxation & Zakat

19 April 2020
Page 28

Customs
Tariff classification – who is responsible

Sharjah university – Taxation & Zakat

19 April 2020
Page 29

Customs
Tariff classification – Harmonized System

Sharjah university – Taxation & Zakat

19 April 2020
Page 30

Customs
Tariff classification – Harmonized System

Sharjah university – Taxation & Zakat

19 April 2020
Page 31

Customs
Tariff classification – Harmonized System

19 April 2020
Page 32

Customs
Tariff classification – Harmonized System

Sharjah university – Taxation & Zakat

19 April 2020
Page 33

Lecture 06
Sharjah university – Taxation & Zakat

19 April 2020
Page 34

Origin
Sharjah university – Taxation & Zakat

19 April 2020
Page 35

Sharjah university – Taxation & Zakat

Free Trade Agreement
Sharjah university – Taxation & Zakat

19 April 2020
Page 38

Sharjah university – Taxation & Zakat

GCC Customs Union
Sharjah university – Taxation & Zakat

19 April 2020
Page 40

Sharjah university – Taxation & Zakat

Lecture 07
Sharjah university – Taxation & Zakat

19 April 2020
Page 42

Greater Arab Free Trade Area

19 April 2020
Page 43

19 April 2020
Page 51

19 April 2020
Page 56

Temporary Imports

19 April 2020
Page 57

Temporary Imports
Sharjah university – Taxation & Zakat

19 April 2020
Page 61

What are Incoterms?
Why are they important?
Which parties are involved in determining the incoterms?
Most favorable incoterms for buyer?
Most favorable incoterms for seller?

Incoterms
Sharjah university – Taxation & Zakat

19 April 2020
Page 71

Customs valuation

19 April 2020
Page 72

Most local GCC countries’ legislation would equal the WTO valuation methods and its sequential application, barring interpretation or definition differences

About color themes
Choose the appropriate design theme for your presentation. The first two options on the design tab are correct EY themes, these two are the only ones that should be used. (1) light backgrounds for handouts; (2) dark backgrounds onscreen.
1
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2
Customs valuation
Related party
Sharjah university – Taxation & Zakat
Establishing that a buyer and a seller are considered to be related parties, should not immediately lead to the transaction value being rejected. Instead, circumstances surrounding the sale should be examined in order to establish whether the relationship between the buyer and the seller has influenced the price (transaction value)
Based on WTO legislation, if the customs authorities has grounds for considering that the relationship influenced the price, it should communicate the grounds to the importer and must grant the importer a reasonable opportunity to respond. The transaction value between related parties should be accepted whenever the importer successfully demonstrates that the value closely approximates:
The transaction value in sales to unrelated buyers of identical or similar goods for export to the same country of importation; or
The customs value calculated based on the deductive method; or
The customs value calculated based on the computed method;
All while taking into account differences in commercial levels, quantity levels, packing, transport and insurance costs and all other costs which should have incurred by a buyer that is not related to a seller
Transfer pricing documentation may in some cases be used to support the abovementioned calculations, however, this cannot be considered officially accepted evidence

About color themes
Choose the appropriate design theme for your presentation. The first two options on the design tab are correct EY themes, these two are the only ones that should be used. (1) light backgrounds for handouts; (2) dark backgrounds onscreen.
1
!
2
Customs valuation
Related party
Sharjah university – Taxation & Zakat
Only if the importer is unsuccessful in demonstrating that the value was not influenced by the relationship between the buyer and the seller, the customs authority should reject the use of the transaction value method to calculate the customs value
Subsequently, the customs value of the goods should be calculated based on one of the other customs valuation methods in line of order. It is not allowed for the customs authority to amend the transaction value in order for it to be an acceptable customs value, without consulting whether one of the other customs valuation methods could be used to calculate the customs value first
Unfortunately, within the GCC practice, this methodology is not always consistently applied. Usually, a customs authority would be expected to accept the value that is invoiced by the seller, unless circumstances would give rise to suspecting the goods are seriously undervalued
If so, we understand from our experiences with the general practice that a customs authority would increase the value to an amount that would be acceptable from a customs perspective, rather than to (first) apply one of the other customs valuation methods in line of order. Although this new value would be presented to the importer to be accepted or not, the new value could only be challenged by taking the case to court, which we would generally not advise any business to do within the GCC region
As a result, we would recommend businesses importing goods into the GCC region to apply commercial values and retain sufficient documentation to support their customs value calculations, in order to provide as few occasion as possible to the customs authority to consider goods being undervalued and consequently to amend the customs value declared. EY would be able to assist in valuation manners prior and during discussions with any customs authority in the GCC region, including settlement advice

19 April 2020
Page 84

Customs broker management

19 April 2020
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19 April 2020
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19 April 2020
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Excise tax
Legislative framework
Sharjah university – Taxation & Zakat

Carbonated drinks – 50%
Any aerated beverage except for unflavored aerated water
Any concentrate, powder, gel or extract intended to be made into an aerated beverage

Tobacco & Tobacco products – 100%

All items listed within Schedule 24 of the GCC Common Customs Tariff

Electronic smoking tools and liquids – 100%

Sweetened beverages – 50%

Manufacturer / Stockpiler
Levies Excise
If Manufacturer / Stockpiler doesn’t levy, any other would be responsible to assess for Excise
Ultimate burden is on Consumer

Sharjah university – Taxation & Zakat

Designated Zone
Consumed / Retail sale from Designated zone

Energy Drinks

Energy Drinks
Sweetened beverages
Electronic smoking tools and liquids

Refund claims- Special cases
Who can submit the refund claims?

Article 21, Federal Decree-Law No. (7) of 2017 on Excise Tax
The FTA may refund Excise Tax paid in certain cases on receipt of a refund application submitted by the following:

Article 8, Federal Decree-Law No. (7) of 2017 on Excise Tax
Any person operating or intending to operate a designated zone shall apply for registration as a warehouse keeper

Warehouse keeper registration
A warehouse keeper is jointly and severally liable for payment of the Excise Tax due on release of goods stored within the designated zone

Provide
At least one of the Designated Zone registration form

Submit financial guarantee

Pay designated fees

Receive Registration Certificate
It is a combination of Warehouse keeper ID & Designated Zone ID

Sharjah university – Taxation & Zakat

Exception from Registration
For those who are not importing excise goods on a regular basis

More often than once in a period not exceeding 6 calendar months
Less than four times in a 24-month period

Record-keeping
Records of Excise goods (manufactured, imported & exported), stock and tax dues

Article 24, Federal Decree-Law No. (7) of 2017 on Excise Tax
Specifies the following record keeping and evidential requirements:

Penalties
More about administrative penalties & tax evasion penalties

Audits
Detailed auditing process of FTA

FTA will apply risk based selection criteria to determine whom to audit

FTA will usually conduct the audit at the person’s place of business or at the FTA offices

If audit at the person’s place, must be informed at least 5 business days prior to
the audit

FTA can close
the place of business for up to 72 hours (e.g. suspect tax evasion)

FTA officer may request original records, merchandise samples, mark inspected assets

The FTA may also remove records, documents and samples

The audited person should be notified the tax audit results within 10 business days after the audit

19 April 2020
Page 114

Sharjah university – Taxation & Zakat

Value Added Tax in the UAE
VAT treatment on selected industries

19 April 2020
Page 120

Sharjah university – Taxation & Zakat

Value Added Tax in the UAE
VAT treatment on selected industries

Value Added Tax in the UAE
Zero rated and exempt supplies

Receipt of goods or services from a person residing in another state or outside the GCC
Importation of goods into a member state

Outside UAE
Supplier located outside UAE does not charge VAT
The customer will pay import VAT and reclaims same VAT
Goods
Import scenario
UAE

Page ‹#›

134

Time of Supply for Services
Time of Supply is earlier of the following

Page ‹#›

2018
Go live date
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec

Contract signed
Supply
Invoice
Payment
Tax point – VAT is due
Time of supply – illustration
Basic rules

Page ‹#›

137

Time of supply
Continuous supply

Page ‹#›

138

Page ‹#›

Time of supply – illustration
Continuous supply
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Contract signed

Bill issued for Q1
Tax point 1
Payment is made for Q2

Tax point 2
Payment is made for Q1
Bill issued for Q2

2018
Go live date

Page ‹#›

Place of Supply for Goods
Exports
The place of supply in case of exports can be divided into 2 categories:
Exports outside the GCC

Exports to GCC member States
The export invoices would be zero rates regardless of place of supply of goods.

Page ‹#›

Place of Supply for Goods

Page ‹#›

Restaurant/ Hotel Services
Lease of a means of transport
Place of performance
Place where the means of transport was made available

Page ‹#›

Value of Supply
General Cases
Value of imported goods equals the customs value in addition to custom duty and excise
Value of imported services equals the market value of the services received

Imports

Page ‹#›

Value of Supply
Value of Supply for Related Parties

Page ‹#›

Input tax paid on procurements in relation to exempted supplies – restricted

Page ‹#›

Taxation and Zakat
University of Sharjah
Dr. Atia Hussain

Jan – May

About color themes

Choose the appropriate design theme for your presentation. The first two options on the design tab are correct EY themes, these two are the only ones that should be used. (

) light backgrounds for handouts; (2) dark backgrounds onscreen.

Course Program

Section

Week 1 (19 Jan): Introduction to Taxation & Zakat

Week 2 (26 Jan): Indirect tax – Customs

Week 3 (2 Feb): Indirect tax – Customs

Week 4 (9 Feb): Indirect tax – Customs

Week 5 (16 Feb): Indirect tax – Excise (18 Feb no lecture)

Week 6 (23 Feb): Indirect tax – Excise

Week 7 (1 Mar): Indirect tax – Conclusion and guest speaker

Week 8 (8-18 March Mid term exam)

Week 10 (22 Mar): Indirect tax – VAT

Week 11 (29 Mar): Indirect tax – VAT

Sharjah university – Taxation & Zakat

About color themes

1
!
2

14 April 2020
Page 1

Sharjah university – Taxation & Zakat

14 April 2020
Page 2

Lecture 01

14 April 2020
Page 3

Introduction to Taxation and Zakat in the
United Arab Emirates (UAE)
Zakat
Tax
Direct tax
Indirect tax
Corporate Income tax
Personal Income tax
Customs duty
Value Added Tax (VAT)
Excise tax

Sharjah university – Taxation & Zakat

14 April 2020
Page 4

Sharjah university – Taxation & Zakat

Introduction to Taxation and Zakat in the UAE
Basic structure/definitions
Zakat
Religious mode
Annual payments
Property/cash/gold
Rate: 2.5%

Sharjah university – Taxation & Zakat

14 April 2020
Page 7

Lecture 02 and 03
Page 8

14 April 2020
Page 8

GCC Customs Union
Referred Law/tariff book/Free Trade Agreement

Sharjah university – Taxation & Zakat

GCC Customs Union
Referred Law/tariff book/Free Trade Agreement

Sharjah university – Taxation & Zakat

14 April 2020
Page 10

Sharjah university – Taxation & Zakat

14 April 2020
Page 11

GCC Customs Union

Sharjah university – Taxation & Zakat

14 April 2020
Page 12

Sharjah university – Taxation & Zakat

14 April 2020
Page 14

UAE free zones customs regime
Example: Jebel Ali Free Zone Area (JAFZA)
All materials, products and equipment brought into JAFZA…
…are entering a duty free zone

Sharjah university – Taxation & Zakat

14 April 2020
Page 15

Sharjah university – Taxation & Zakat

14 April 2020
Page 16

Sharjah university – Taxation & Zakat

Lecture 04
Sharjah university – Taxation & Zakat

14 April 2020
Page 18

Sharjah university – Taxation & Zakat

14 April 2020
Page 21

14 April 2020
Page 22

Basics in Global Trade
Sample Certificate of origin
Sharjah university – Taxation & Zakat

14 April 2020
Page 23

Basics in Global Trade
Sample customs declaration/Bayan/Bill of entry
Sharjah university – Taxation & Zakat

14 April 2020
Page 24

Basics
Customs topics
Tariff classification
Origin of goods
Incoterms
Customs valuation
Temporary imports
Free Tarde Agreements
GCC free trade agreement
Greater Arab Free Trade Agreement

Sharjah university – Taxation & Zakat

14 April 2020
Page 25

Lecture 05
Sharjah university – Taxation & Zakat

14 April 2020
Page 26

Tariff Classification
Sharjah university – Taxation & Zakat

14 April 2020
Page 27

Customs
Tariff classification – why it is important

Sharjah university – Taxation & Zakat

14 April 2020
Page 28

Customs
Tariff classification – who is responsible

Sharjah university – Taxation & Zakat

14 April 2020
Page 29

Customs
Tariff classification – Harmonized System

Sharjah university – Taxation & Zakat

14 April 2020
Page 30

Customs
Tariff classification – Harmonized System

Sharjah university – Taxation & Zakat

14 April 2020
Page 31

Customs
Tariff classification – Harmonized System

14 April 2020
Page 32

Customs
Tariff classification – Harmonized System

Sharjah university – Taxation & Zakat

14 April 2020
Page 33

Lecture 06
Sharjah university – Taxation & Zakat

14 April 2020
Page 34

Origin
Sharjah university – Taxation & Zakat

14 April 2020
Page 35

Sharjah university – Taxation & Zakat

Free Trade Agreement
Sharjah university – Taxation & Zakat

14 April 2020
Page 38

Sharjah university – Taxation & Zakat

GCC Customs Union
Sharjah university – Taxation & Zakat

14 April 2020
Page 40

Sharjah university – Taxation & Zakat

Lecture 07
Sharjah university – Taxation & Zakat

14 April 2020
Page 42

Greater Arab Free Trade Area

14 April 2020
Page 43

14 April 2020
Page 51

14 April 2020
Page 56

Temporary Imports

14 April 2020
Page 57

Temporary Imports
Sharjah university – Taxation & Zakat

14 April 2020
Page 61

What are Incoterms?
Why are they important?
Which parties are involved in determining the incoterms?
Most favorable incoterms for buyer?
Most favorable incoterms for seller?

Incoterms
Sharjah university – Taxation & Zakat

14 April 2020
Page 71

Customs valuation

14 April 2020
Page 72

Most local GCC countries’ legislation would equal the WTO valuation methods and its sequential application, barring interpretation or definition differences

About color themes
Choose the appropriate design theme for your presentation. The first two options on the design tab are correct EY themes, these two are the only ones that should be used. (1) light backgrounds for handouts; (2) dark backgrounds onscreen.
1
!
2
Customs valuation
Related party
Sharjah university – Taxation & Zakat
Establishing that a buyer and a seller are considered to be related parties, should not immediately lead to the transaction value being rejected. Instead, circumstances surrounding the sale should be examined in order to establish whether the relationship between the buyer and the seller has influenced the price (transaction value)
Based on WTO legislation, if the customs authorities has grounds for considering that the relationship influenced the price, it should communicate the grounds to the importer and must grant the importer a reasonable opportunity to respond. The transaction value between related parties should be accepted whenever the importer successfully demonstrates that the value closely approximates:
The transaction value in sales to unrelated buyers of identical or similar goods for export to the same country of importation; or
The customs value calculated based on the deductive method; or
The customs value calculated based on the computed method;
All while taking into account differences in commercial levels, quantity levels, packing, transport and insurance costs and all other costs which should have incurred by a buyer that is not related to a seller
Transfer pricing documentation may in some cases be used to support the abovementioned calculations, however, this cannot be considered officially accepted evidence

About color themes
Choose the appropriate design theme for your presentation. The first two options on the design tab are correct EY themes, these two are the only ones that should be used. (1) light backgrounds for handouts; (2) dark backgrounds onscreen.
1
!
2
Customs valuation
Related party
Sharjah university – Taxation & Zakat
Only if the importer is unsuccessful in demonstrating that the value was not influenced by the relationship between the buyer and the seller, the customs authority should reject the use of the transaction value method to calculate the customs value
Subsequently, the customs value of the goods should be calculated based on one of the other customs valuation methods in line of order. It is not allowed for the customs authority to amend the transaction value in order for it to be an acceptable customs value, without consulting whether one of the other customs valuation methods could be used to calculate the customs value first
Unfortunately, within the GCC practice, this methodology is not always consistently applied. Usually, a customs authority would be expected to accept the value that is invoiced by the seller, unless circumstances would give rise to suspecting the goods are seriously undervalued
If so, we understand from our experiences with the general practice that a customs authority would increase the value to an amount that would be acceptable from a customs perspective, rather than to (first) apply one of the other customs valuation methods in line of order. Although this new value would be presented to the importer to be accepted or not, the new value could only be challenged by taking the case to court, which we would generally not advise any business to do within the GCC region
As a result, we would recommend businesses importing goods into the GCC region to apply commercial values and retain sufficient documentation to support their customs value calculations, in order to provide as few occasion as possible to the customs authority to consider goods being undervalued and consequently to amend the customs value declared. EY would be able to assist in valuation manners prior and during discussions with any customs authority in the GCC region, including settlement advice

14 April 2020
Page 84

Customs broker management

14 April 2020
Page 85

14 April 2020
Page 90

14 April 2020
Page 93

Excise tax
Legislative framework
Sharjah university – Taxation & Zakat

Carbonated drinks – 50%
Any aerated beverage except for unflavored aerated water
Any concentrate, powder, gel or extract intended to be made into an aerated beverage

Tobacco & Tobacco products – 100%

All items listed within Schedule 24 of the GCC Common Customs Tariff

Electronic smoking tools and liquids – 100%

Sweetened beverages – 50%

Manufacturer / Stockpiler
Levies Excise
If Manufacturer / Stockpiler doesn’t levy, any other would be responsible to assess for Excise
Ultimate burden is on Consumer

Sharjah university – Taxation & Zakat

Designated Zone
Consumed / Retail sale from Designated zone

Energy Drinks

Energy Drinks
Sweetened beverages
Electronic smoking tools and liquids

Refund claims- Special cases
Who can submit the refund claims?

Article 21, Federal Decree-Law No. (7) of 2017 on Excise Tax
The FTA may refund Excise Tax paid in certain cases on receipt of a refund application submitted by the following:

Article 8, Federal Decree-Law No. (7) of 2017 on Excise Tax
Any person operating or intending to operate a designated zone shall apply for registration as a warehouse keeper

Warehouse keeper registration
A warehouse keeper is jointly and severally liable for payment of the Excise Tax due on release of goods stored within the designated zone

Provide
At least one of the Designated Zone registration form

Submit financial guarantee

Pay designated fees

Receive Registration Certificate
It is a combination of Warehouse keeper ID & Designated Zone ID

Sharjah university – Taxation & Zakat

Exception from Registration
For those who are not importing excise goods on a regular basis

More often than once in a period not exceeding 6 calendar months
Less than four times in a 24-month period

Record-keeping
Records of Excise goods (manufactured, imported & exported), stock and tax dues

Article 24, Federal Decree-Law No. (7) of 2017 on Excise Tax
Specifies the following record keeping and evidential requirements:

Penalties
More about administrative penalties & tax evasion penalties

Audits
Detailed auditing process of FTA

FTA will apply risk based selection criteria to determine whom to audit

FTA will usually conduct the audit at the person’s place of business or at the FTA offices

If audit at the person’s place, must be informed at least 5 business days prior to
the audit

FTA can close
the place of business for up to 72 hours (e.g. suspect tax evasion)

FTA officer may request original records, merchandise samples, mark inspected assets

The FTA may also remove records, documents and samples

The audited person should be notified the tax audit results within 10 business days after the audit

14 April 2020
Page 114

Sharjah university – Taxation & Zakat

Value Added Tax in the UAE
VAT treatment on selected industries

14 April 2020
Page 120

Sharjah university – Taxation & Zakat

Value Added Tax in the UAE
VAT treatment on selected industries

Value Added Tax in the UAE
Zero rated and exempt supplies

Value Added Tax in the UAE
Reverse charge mechanism
What is Reverse charge mechanism?
It is a mechanism by which the taxable customer is obligated to pay the tax due on behalf of the suppler and is liable for all obligations provided for in the Agreement and the Local Law”. The Reverse charge mechanism is a concept applicable, but not limited, to the following cases:

Receipt of goods or services from a person residing in another state or outside the GCC
Importation of goods into a member state

Outside UAE
Supplier located outside UAE does not charge VAT
The customer will pay import VAT and reclaims same VAT
Goods
Import scenario
UAE

Page ‹#›

134

Page ‹#›

Invoice
Payment
Performance Based
Where services are provided
Date on which services are provided to the recipient
Date on which supplier issues a tax invoice
Date on which supplier receives payment with respect to supply
Date on which performance is completed

Time of Supply for Services
Time of Supply is earlier of the following

Page ‹#›

2018
Go live date
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec

Contract signed
Supply
Invoice
Payment
Tax point – VAT is due
Time of supply – illustration
Basic rules

Page ‹#›

137

Time of supply
Continuous supply

Transactions that result in issuance of invoices or related payments in a successive manner
Time of supply shall be considered earlier of the following events:
The date of issue of a Tax Invoice or any other equivalent document
The due date of payment of the amount specified in the Tax
The date of receipt of payment
At least once in 12 months

Page ‹#›

138

Time of supply – illustration
Continuous supply
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Contract signed

Bill issued for Q1
Tax point 1
Payment is made for Q2

Tax point 2
Payment is made for Q1
Bill issued for Q2

2018
Go live date

Page ‹#›

VAT on transitional provisions
Illustration
Scenario 1 2 3
Supply made before
implementation date Supply made after
implementation date Continuous supply
Supply of goods P P
Supply of services P P
Importation of goods P
Invoice issued P
Receipt of payment P
Supply of goods P P
Supply of services P P
Importation of goods P
Invoice issued P P
Receipt of payment P P
Will VAT apply O P P
VAT treatment No VAT shall be charged on
supply of goods and services VAT shall be charged on supply
of goods and services VAT charged only on value of
goods and services provided
after the implementation date

VAT
Implementation
date

Page ‹#›

140

Tax invoice and its importance for recovery
Tax invoice contents
The words “Tax Invoice” clearly displayed
Supplier’s name
Supplier’s address
Supplier’s VAT number
Customer’s name
Customer’s address
Date of issuance of the tax invoice
Date of supply (where different to date of issuance)
Date of payment (where different to date of issuance)
Sequential invoice number
Description of the goods or services supplied
Quantity of goods supplied
Unit price, exclusive of VAT, in AED
Value of discounts, if any, in AED
Value of supply, exclusive of VAT, in AED
VAT rate applied
The exchange rate applied where a currency other than AED is used

In order for the business to recover the input VAT, it should receive a compliant tax invoice that includes the minimum tax invoice requirements.
Otherwise, if the tax invoice is not compliant, then input VAT shall not be recovered.
Where the business is obliged to pay Tax through the reverse charge mechanism, it shall record the Tax amount due in AED in respect of the transaction on the invoice issued by the supplier residing outside the UAE.

Page ‹#›

141

The UAE Central Bank started publishing daily exchange rates on the UAE Central Bank website – https://www.centralbank.ae/en/ from 17 May 2018
The FTA also published a public clarification on the use of exchange rates for VAT purposes which states that where a supply was made in a currency other than UAE Dirham, then the amount stated on the issued tax invoice should be converted into the UAE Dirham according to the exchange rate approved by the UAE Central Bank as on the date of supply.
Moreover, in the case of imported services which are subject to VAT under the reverse charge mechanism, the clarification states that it is acceptable to use the date of the invoice as the relevant date for the purpose of conversion.

Use of Exchange Rates

Page ‹#›

Taxation and Zakat
University of Sharjah
Dr. Atia Hussain

Jan – May

About color themes

Choose the appropriate design theme for your presentation. The first two options on the design tab are correct EY themes, these two are the only ones that should be used. (

) light backgrounds for handouts; (2) dark backgrounds onscreen.

Course Program

Section

Week 1 (19 Jan): Introduction to Taxation & Zakat

Week 2 (26 Jan): Indirect tax – Customs

Week 3 (2 Feb): Indirect tax – Customs

Week 4 (9 Feb): Indirect tax – Customs

Week 5 (16 Feb): Indirect tax – Excise (18 Feb no lecture)

Week 6 (23 Feb): Indirect tax – Excise

Week 7 (1 Mar): Indirect tax – Conclusion and guest speaker

Week 8 (8-18 March Mid term exam)

Week 10 (22 Mar): Indirect tax – VAT

Week 11 (29 Mar): Indirect tax – VAT

Sharjah university – Taxation & Zakat

About color themes

1
!
2

22 March 2020
Page 1

Sharjah university – Taxation & Zakat

22 March 2020
Page 2

Lecture 01

22 March 2020
Page 3

Introduction to Taxation and Zakat in the
United Arab Emirates (UAE)
Zakat
Tax
Direct tax
Indirect tax
Corporate Income tax
Personal Income tax
Customs duty
Value Added Tax (VAT)
Excise tax

Sharjah university – Taxation & Zakat

22 March 2020
Page 4

Sharjah university – Taxation & Zakat

Introduction to Taxation and Zakat in the UAE
Basic structure/definitions
Zakat
Religious mode
Annual payments
Property/cash/gold
Rate: 2.5%

Sharjah university – Taxation & Zakat

22 March 2020
Page 7

Lecture 02 and 03
Page 8

22 March 2020
Page 8

GCC Customs Union
Referred Law/tariff book/Free Trade Agreement

Sharjah university – Taxation & Zakat

GCC Customs Union
Referred Law/tariff book/Free Trade Agreement

Sharjah university – Taxation & Zakat

22 March 2020
Page 10

Sharjah university – Taxation & Zakat

22 March 2020
Page 11

GCC Customs Union

Sharjah university – Taxation & Zakat

22 March 2020
Page 12

Sharjah university – Taxation & Zakat

22 March 2020
Page 14

UAE free zones customs regime
Example: Jebel Ali Free Zone Area (JAFZA)
All materials, products and equipment brought into JAFZA…
…are entering a duty free zone

Sharjah university – Taxation & Zakat

22 March 2020
Page 15

Sharjah university – Taxation & Zakat

22 March 2020
Page 16

Sharjah university – Taxation & Zakat

Lecture 04
Sharjah university – Taxation & Zakat

22 March 2020
Page 18

Sharjah university – Taxation & Zakat

22 March 2020
Page 21

22 March 2020
Page 22

Basics in Global Trade
Sample Certificate of origin
Sharjah university – Taxation & Zakat

22 March 2020
Page 23

Basics in Global Trade
Sample customs declaration/Bayan/Bill of entry
Sharjah university – Taxation & Zakat

22 March 2020
Page 24

Basics
Customs topics
Tariff classification
Origin of goods
Incoterms
Customs valuation
Temporary imports
Free Tarde Agreements
GCC free trade agreement
Greater Arab Free Trade Agreement

Sharjah university – Taxation & Zakat

22 March 2020
Page 25

Lecture 05
Sharjah university – Taxation & Zakat

22 March 2020
Page 26

Tariff Classification
Sharjah university – Taxation & Zakat

22 March 2020
Page 27

Customs
Tariff classification – why it is important

Sharjah university – Taxation & Zakat

22 March 2020
Page 28

Customs
Tariff classification – who is responsible

Sharjah university – Taxation & Zakat

22 March 2020
Page 29

Customs
Tariff classification – Harmonized System

Sharjah university – Taxation & Zakat

22 March 2020
Page 30

Customs
Tariff classification – Harmonized System

Sharjah university – Taxation & Zakat

22 March 2020
Page 31

Customs
Tariff classification – Harmonized System

22 March 2020
Page 32

Customs
Tariff classification – Harmonized System

Sharjah university – Taxation & Zakat

22 March 2020
Page 33

Lecture 06
Sharjah university – Taxation & Zakat

22 March 2020
Page 34

Origin
Sharjah university – Taxation & Zakat

22 March 2020
Page 35

Sharjah university – Taxation & Zakat

Free Trade Agreement
Sharjah university – Taxation & Zakat

22 March 2020
Page 38

Sharjah university – Taxation & Zakat

GCC Customs Union
Sharjah university – Taxation & Zakat

22 March 2020
Page 40

Sharjah university – Taxation & Zakat

Lecture 07
Sharjah university – Taxation & Zakat

22 March 2020
Page 42

Greater Arab Free Trade Area

22 March 2020
Page 43

22 March 2020
Page 51

22 March 2020
Page 56

Temporary Imports

22 March 2020
Page 57

Temporary Imports
Sharjah university – Taxation & Zakat

22 March 2020
Page 61

What are Incoterms?
Why are they important?
Which parties are involved in determining the incoterms?
Most favorable incoterms for buyer?
Most favorable incoterms for seller?

Incoterms
Sharjah university – Taxation & Zakat

22 March 2020
Page 71

Customs valuation

22 March 2020
Page 72

Most local GCC countries’ legislation would equal the WTO valuation methods and its sequential application, barring interpretation or definition differences

About color themes
Choose the appropriate design theme for your presentation. The first two options on the design tab are correct EY themes, these two are the only ones that should be used. (1) light backgrounds for handouts; (2) dark backgrounds onscreen.
1
!
2
Customs valuation
Related party
Sharjah university – Taxation & Zakat
Establishing that a buyer and a seller are considered to be related parties, should not immediately lead to the transaction value being rejected. Instead, circumstances surrounding the sale should be examined in order to establish whether the relationship between the buyer and the seller has influenced the price (transaction value)
Based on WTO legislation, if the customs authorities has grounds for considering that the relationship influenced the price, it should communicate the grounds to the importer and must grant the importer a reasonable opportunity to respond. The transaction value between related parties should be accepted whenever the importer successfully demonstrates that the value closely approximates:
The transaction value in sales to unrelated buyers of identical or similar goods for export to the same country of importation; or
The customs value calculated based on the deductive method; or
The customs value calculated based on the computed method;
All while taking into account differences in commercial levels, quantity levels, packing, transport and insurance costs and all other costs which should have incurred by a buyer that is not related to a seller
Transfer pricing documentation may in some cases be used to support the abovementioned calculations, however, this cannot be considered officially accepted evidence

About color themes
Choose the appropriate design theme for your presentation. The first two options on the design tab are correct EY themes, these two are the only ones that should be used. (1) light backgrounds for handouts; (2) dark backgrounds onscreen.
1
!
2
Customs valuation
Related party
Sharjah university – Taxation & Zakat
Only if the importer is unsuccessful in demonstrating that the value was not influenced by the relationship between the buyer and the seller, the customs authority should reject the use of the transaction value method to calculate the customs value
Subsequently, the customs value of the goods should be calculated based on one of the other customs valuation methods in line of order. It is not allowed for the customs authority to amend the transaction value in order for it to be an acceptable customs value, without consulting whether one of the other customs valuation methods could be used to calculate the customs value first
Unfortunately, within the GCC practice, this methodology is not always consistently applied. Usually, a customs authority would be expected to accept the value that is invoiced by the seller, unless circumstances would give rise to suspecting the goods are seriously undervalued
If so, we understand from our experiences with the general practice that a customs authority would increase the value to an amount that would be acceptable from a customs perspective, rather than to (first) apply one of the other customs valuation methods in line of order. Although this new value would be presented to the importer to be accepted or not, the new value could only be challenged by taking the case to court, which we would generally not advise any business to do within the GCC region
As a result, we would recommend businesses importing goods into the GCC region to apply commercial values and retain sufficient documentation to support their customs value calculations, in order to provide as few occasion as possible to the customs authority to consider goods being undervalued and consequently to amend the customs value declared. EY would be able to assist in valuation manners prior and during discussions with any customs authority in the GCC region, including settlement advice

22 March 2020
Page 84

Customs broker management

22 March 2020
Page 85

22 March 2020
Page 90

22 March 2020
Page 93

Excise tax
Legislative framework
Sharjah university – Taxation & Zakat

Carbonated drinks – 50%
Any aerated beverage except for unflavored aerated water
Any concentrate, powder, gel or extract intended to be made into an aerated beverage

Tobacco & Tobacco products – 100%

All items listed within Schedule 24 of the GCC Common Customs Tariff

Electronic smoking tools and liquids – 100%

Sweetened beverages – 50%

Manufacturer / Stockpiler
Levies Excise
If Manufacturer / Stockpiler doesn’t levy, any other would be responsible to assess for Excise
Ultimate burden is on Consumer

Sharjah university – Taxation & Zakat

Designated Zone
Consumed / Retail sale from Designated zone

Energy Drinks

Energy Drinks
Sweetened beverages
Electronic smoking tools and liquids

Refund claims- Special cases
Who can submit the refund claims?

Article 21, Federal Decree-Law No. (7) of 2017 on Excise Tax
The FTA may refund Excise Tax paid in certain cases on receipt of a refund application submitted by the following:

Article 8, Federal Decree-Law No. (7) of 2017 on Excise Tax
Any person operating or intending to operate a designated zone shall apply for registration as a warehouse keeper

Warehouse keeper registration
A warehouse keeper is jointly and severally liable for payment of the Excise Tax due on release of goods stored within the designated zone

Provide
At least one of the Designated Zone registration form

Submit financial guarantee

Pay designated fees

Receive Registration Certificate
It is a combination of Warehouse keeper ID & Designated Zone ID

Sharjah university – Taxation & Zakat

Exception from Registration
For those who are not importing excise goods on a regular basis

More often than once in a period not exceeding 6 calendar months
Less than four times in a 24-month period

Record-keeping
Records of Excise goods (manufactured, imported & exported), stock and tax dues

Article 24, Federal Decree-Law No. (7) of 2017 on Excise Tax
Specifies the following record keeping and evidential requirements:

Penalties
More about administrative penalties & tax evasion penalties

Audits
Detailed auditing process of FTA

FTA will apply risk based selection criteria to determine whom to audit

FTA will usually conduct the audit at the person’s place of business or at the FTA offices

If audit at the person’s place, must be informed at least 5 business days prior to
the audit

FTA can close
the place of business for up to 72 hours (e.g. suspect tax evasion)

FTA officer may request original records, merchandise samples, mark inspected assets

The FTA may also remove records, documents and samples

The audited person should be notified the tax audit results within 10 business days after the audit

22 March 2020
Page 114

Sharjah university – Taxation & Zakat

Value Added Tax in the UAE
VAT treatment on selected industries

22 March 2020
Page 120

Sharjah university – Taxation & Zakat

Value Added Tax in the UAE
VAT treatment on selected industries

Value Added Tax in the UAE
xxxxxxxxxxx

Taxation and Zakat
University of Sharjah
Dr. Atia Hussain

Jan – May

About color themes

Choose the appropriate design theme for your presentation. The first two options on the design tab are correct EY themes, these two are the only ones that should be used. (

) light backgrounds for handouts; (2) dark backgrounds onscreen.

Course Program

Section

Week 1 (19 Jan): Introduction to Taxation & Zakat

Week 2 (26 Jan): Indirect tax – Customs

Week 3 (2 Feb): Indirect tax – Customs

Week 4 (9 Feb): Indirect tax – Customs

Week 5 (16 Feb): Indirect tax – Excise (18 Feb no lecture)

Week 6 (23 Feb): Indirect tax – Excise

Week 7 (1 Mar): Indirect tax – Conclusion and guest speaker

Week 8 (8-18 March Mid term exam)

Week 10 (22 Mar): Indirect tax – VAT

Week 11 (29 Mar): Indirect tax – VAT

Sharjah university – Taxation & Zakat

About color themes

1
!
2

17 March 2020
Page 1

Sharjah university – Taxation & Zakat

17 March 2020
Page 2

Lecture 01

17 March 2020
Page 3

Introduction to Taxation and Zakat in the
United Arab Emirates (UAE)
Zakat
Tax
Direct tax
Indirect tax
Corporate Income tax
Personal Income tax
Customs duty
Value Added Tax (VAT)
Excise tax

Sharjah university – Taxation & Zakat

17 March 2020
Page 4

Sharjah university – Taxation & Zakat

Introduction to Taxation and Zakat in the UAE
Basic structure/definitions
Zakat
Religious mode
Annual payments
Property/cash/gold
Rate: 2.5%

Sharjah university – Taxation & Zakat

17 March 2020
Page 7

Lecture 02 and 03
Page 8

17 March 2020
Page 8

GCC Customs Union
Referred Law/tariff book/Free Trade Agreement

Sharjah university – Taxation & Zakat

GCC Customs Union
Referred Law/tariff book/Free Trade Agreement

Sharjah university – Taxation & Zakat

17 March 2020
Page 10

Sharjah university – Taxation & Zakat

17 March 2020
Page 11

GCC Customs Union

Sharjah university – Taxation & Zakat

17 March 2020
Page 12

Sharjah university – Taxation & Zakat

17 March 2020
Page 14

UAE free zones customs regime
Example: Jebel Ali Free Zone Area (JAFZA)
All materials, products and equipment brought into JAFZA…
…are entering a duty free zone

Sharjah university – Taxation & Zakat

17 March 2020
Page 15

Sharjah university – Taxation & Zakat

17 March 2020
Page 16

Sharjah university – Taxation & Zakat

Lecture 04
Sharjah university – Taxation & Zakat

17 March 2020
Page 18

Sharjah university – Taxation & Zakat

17 March 2020
Page 21

17 March 2020
Page 22

Basics in Global Trade
Sample Certificate of origin
Sharjah university – Taxation & Zakat

17 March 2020
Page 23

Basics in Global Trade
Sample customs declaration/Bayan/Bill of entry
Sharjah university – Taxation & Zakat

17 March 2020
Page 24

Basics
Customs topics
Tariff classification
Origin of goods
Incoterms
Customs valuation
Temporary imports
Free Tarde Agreements
GCC free trade agreement
Greater Arab Free Trade Agreement

Sharjah university – Taxation & Zakat

17 March 2020
Page 25

Lecture 05
Sharjah university – Taxation & Zakat

17 March 2020
Page 26

Tariff Classification
Sharjah university – Taxation & Zakat

17 March 2020
Page 27

Customs
Tariff classification – why it is important

Sharjah university – Taxation & Zakat

17 March 2020
Page 28

Customs
Tariff classification – who is responsible

Sharjah university – Taxation & Zakat

17 March 2020
Page 29

Customs
Tariff classification – Harmonized System

Sharjah university – Taxation & Zakat

17 March 2020
Page 30

Customs
Tariff classification – Harmonized System

Sharjah university – Taxation & Zakat

17 March 2020
Page 31

Customs
Tariff classification – Harmonized System

17 March 2020
Page 32

Customs
Tariff classification – Harmonized System

Sharjah university – Taxation & Zakat

17 March 2020
Page 33

Lecture 06
Sharjah university – Taxation & Zakat

17 March 2020
Page 34

Origin
Sharjah university – Taxation & Zakat

17 March 2020
Page 35

Sharjah university – Taxation & Zakat

Free Trade Agreement
Sharjah university – Taxation & Zakat

17 March 2020
Page 38

Sharjah university – Taxation & Zakat

GCC Customs Union
Sharjah university – Taxation & Zakat

17 March 2020
Page 40

Sharjah university – Taxation & Zakat

Lecture 07
Sharjah university – Taxation & Zakat

17 March 2020
Page 42

Greater Arab Free Trade Area

17 March 2020
Page 43

17 March 2020
Page 51

17 March 2020
Page 56

Temporary Imports

17 March 2020
Page 57

Temporary Imports
Sharjah university – Taxation & Zakat

17 March 2020
Page 61

What are Incoterms?
Why are they important?
Which parties are involved in determining the incoterms?
Most favorable incoterms for buyer?
Most favorable incoterms for seller?

Incoterms
Sharjah university – Taxation & Zakat

17 March 2020
Page 71

Customs valuation

17 March 2020
Page 72

Most local GCC countries’ legislation would equal the WTO valuation methods and its sequential application, barring interpretation or definition differences

About color themes
Choose the appropriate design theme for your presentation. The first two options on the design tab are correct EY themes, these two are the only ones that should be used. (1) light backgrounds for handouts; (2) dark backgrounds onscreen.
1
!
2
Customs valuation
Related party
Sharjah university – Taxation & Zakat
Establishing that a buyer and a seller are considered to be related parties, should not immediately lead to the transaction value being rejected. Instead, circumstances surrounding the sale should be examined in order to establish whether the relationship between the buyer and the seller has influenced the price (transaction value)
Based on WTO legislation, if the customs authorities has grounds for considering that the relationship influenced the price, it should communicate the grounds to the importer and must grant the importer a reasonable opportunity to respond. The transaction value between related parties should be accepted whenever the importer successfully demonstrates that the value closely approximates:
The transaction value in sales to unrelated buyers of identical or similar goods for export to the same country of importation; or
The customs value calculated based on the deductive method; or
The customs value calculated based on the computed method;
All while taking into account differences in commercial levels, quantity levels, packing, transport and insurance costs and all other costs which should have incurred by a buyer that is not related to a seller
Transfer pricing documentation may in some cases be used to support the abovementioned calculations, however, this cannot be considered officially accepted evidence

About color themes
Choose the appropriate design theme for your presentation. The first two options on the design tab are correct EY themes, these two are the only ones that should be used. (1) light backgrounds for handouts; (2) dark backgrounds onscreen.
1
!
2
Customs valuation
Related party
Sharjah university – Taxation & Zakat
Only if the importer is unsuccessful in demonstrating that the value was not influenced by the relationship between the buyer and the seller, the customs authority should reject the use of the transaction value method to calculate the customs value
Subsequently, the customs value of the goods should be calculated based on one of the other customs valuation methods in line of order. It is not allowed for the customs authority to amend the transaction value in order for it to be an acceptable customs value, without consulting whether one of the other customs valuation methods could be used to calculate the customs value first
Unfortunately, within the GCC practice, this methodology is not always consistently applied. Usually, a customs authority would be expected to accept the value that is invoiced by the seller, unless circumstances would give rise to suspecting the goods are seriously undervalued
If so, we understand from our experiences with the general practice that a customs authority would increase the value to an amount that would be acceptable from a customs perspective, rather than to (first) apply one of the other customs valuation methods in line of order. Although this new value would be presented to the importer to be accepted or not, the new value could only be challenged by taking the case to court, which we would generally not advise any business to do within the GCC region
As a result, we would recommend businesses importing goods into the GCC region to apply commercial values and retain sufficient documentation to support their customs value calculations, in order to provide as few occasion as possible to the customs authority to consider goods being undervalued and consequently to amend the customs value declared. EY would be able to assist in valuation manners prior and during discussions with any customs authority in the GCC region, including settlement advice

17 March 2020
Page 84

Customs broker management

17 March 2020
Page 85

17 March 2020
Page 90

17 March 2020
Page 93

Excise tax
Legislative framework
Sharjah university – Taxation & Zakat

Carbonated drinks – 50%
Any aerated beverage except for unflavored aerated water
Any concentrate, powder, gel or extract intended to be made into an aerated beverage

Tobacco & Tobacco products – 100%

All items listed within Schedule 24 of the GCC Common Customs Tariff

Electronic smoking tools and liquids – 100%

Sweetened beverages – 50%

Manufacturer / Stockpiler
Levies Excise
If Manufacturer / Stockpiler doesn’t levy, any other would be responsible to assess for Excise
Ultimate burden is on Consumer

Sharjah university – Taxation & Zakat

Designated Zone
Consumed / Retail sale from Designated zone

Energy Drinks

Energy Drinks
Sweetened beverages
Electronic smoking tools and liquids

Refund claims- Special cases
Who can submit the refund claims?

Article 21, Federal Decree-Law No. (7) of 2017 on Excise Tax
The FTA may refund Excise Tax paid in certain cases on receipt of a refund application submitted by the following:

Article 8, Federal Decree-Law No. (7) of 2017 on Excise Tax
Any person operating or intending to operate a designated zone shall apply for registration as a warehouse keeper

Warehouse keeper registration
A warehouse keeper is jointly and severally liable for payment of the Excise Tax due on release of goods stored within the designated zone

Provide
At least one of the Designated Zone registration form

Submit financial guarantee

Pay designated fees

Receive Registration Certificate
It is a combination of Warehouse keeper ID & Designated Zone ID

Sharjah university – Taxation & Zakat

Exception from Registration
For those who are not importing excise goods on a regular basis

More often than once in a period not exceeding 6 calendar months
Less than four times in a 24-month period

Record-keeping
Records of Excise goods (manufactured, imported & exported), stock and tax dues

Article 24, Federal Decree-Law No. (7) of 2017 on Excise Tax
Specifies the following record keeping and evidential requirements:

Penalties
More about administrative penalties & tax evasion penalties

Audits
Detailed auditing process of FTA

FTA will apply risk based selection criteria to determine whom to audit

FTA will usually conduct the audit at the person’s place of business or at the FTA offices

If audit at the person’s place, must be informed at least 5 business days prior to
the audit

FTA can close
the place of business for up to 72 hours (e.g. suspect tax evasion)

FTA officer may request original records, merchandise samples, mark inspected assets

The FTA may also remove records, documents and samples

The audited person should be notified the tax audit results within 10 business days after the audit

Taxation and Zakat
University of Sharjah
Dr. Atia Hussain

Jan – May

About color themes

Choose the appropriate design theme for your presentation. The first two options on the design tab are correct EY themes, these two are the only ones that should be used. (

) light backgrounds for handouts; (2) dark backgrounds onscreen.

Course Program

Section

Week 1 (19 Jan): Introduction to Taxation & Zakat

Week 2 (26 Jan): Indirect tax – Customs

Week 3 (2 Feb): Indirect tax – Customs

Week 4 (9 Feb): Indirect tax – Customs

Week 5 (16 Feb): Indirect tax – Excise (18 Feb no lecture)

Week 6 (23 Feb): Indirect tax – Excise

Week 7 (1 Mar): Indirect tax – Conclusion and guest speaker

Week 8 (8-18 March Mid term exam)

Week 10 (22 Mar): Indirect tax – VAT

Week 11 (29 Mar): Indirect tax – VAT

Sharjah university – Taxation & Zakat

About color themes

1
!
2

08 March 2020
Page 1

Sharjah university – Taxation & Zakat

08 March 2020
Page 2

Lecture 01

08 March 2020
Page 3

Introduction to Taxation and Zakat in the
United Arab Emirates (UAE)
Zakat
Tax
Direct tax
Indirect tax
Corporate Income tax
Personal Income tax
Customs duty
Value Added Tax (VAT)
Excise tax

Sharjah university – Taxation & Zakat

08 March 2020
Page 4

Sharjah university – Taxation & Zakat

Introduction to Taxation and Zakat in the UAE
Basic structure/definitions
Zakat
Religious mode
Annual payments
Property/cash/gold
Rate: 2.5%

Sharjah university – Taxation & Zakat

08 March 2020
Page 7

Lecture 02 and 03
Page 8

08 March 2020
Page 8

GCC Customs Union
Referred Law/tariff book/Free Trade Agreement

Sharjah university – Taxation & Zakat

GCC Customs Union
Referred Law/tariff book/Free Trade Agreement

Sharjah university – Taxation & Zakat

08 March 2020
Page 10

Sharjah university – Taxation & Zakat

08 March 2020
Page 11

GCC Customs Union

Sharjah university – Taxation & Zakat

08 March 2020
Page 12

Sharjah university – Taxation & Zakat

08 March 2020
Page 14

UAE free zones customs regime
Example: Jebel Ali Free Zone Area (JAFZA)
All materials, products and equipment brought into JAFZA…
…are entering a duty free zone

Sharjah university – Taxation & Zakat

08 March 2020
Page 15

Sharjah university – Taxation & Zakat

08 March 2020
Page 16

Sharjah university – Taxation & Zakat

Lecture 04
Sharjah university – Taxation & Zakat

08 March 2020
Page 18

Sharjah university – Taxation & Zakat

08 March 2020
Page 21

08 March 2020
Page 22

Basics in Global Trade
Sample Certificate of origin
Sharjah university – Taxation & Zakat

08 March 2020
Page 23

Basics in Global Trade
Sample customs declaration/Bayan/Bill of entry
Sharjah university – Taxation & Zakat

08 March 2020
Page 24

Basics
Customs topics
Tariff classification
Origin of goods
Incoterms
Customs valuation
Temporary imports
Free Tarde Agreements
GCC free trade agreement
Greater Arab Free Trade Agreement

Sharjah university – Taxation & Zakat

08 March 2020
Page 25

Lecture 05
Sharjah university – Taxation & Zakat

08 March 2020
Page 26

Tariff Classification
Sharjah university – Taxation & Zakat

08 March 2020
Page 27

Customs
Tariff classification – why it is important

Sharjah university – Taxation & Zakat

08 March 2020
Page 28

Customs
Tariff classification – who is responsible

Sharjah university – Taxation & Zakat

08 March 2020
Page 29

Customs
Tariff classification – Harmonized System

Sharjah university – Taxation & Zakat

08 March 2020
Page 30

Customs
Tariff classification – Harmonized System

Sharjah university – Taxation & Zakat

08 March 2020
Page 31

Customs
Tariff classification – Harmonized System

08 March 2020
Page 32

Customs
Tariff classification – Harmonized System

Sharjah university – Taxation & Zakat

08 March 2020
Page 33

Lecture 06
Sharjah university – Taxation & Zakat

08 March 2020
Page 34

Origin
Sharjah university – Taxation & Zakat

08 March 2020
Page 35

Sharjah university – Taxation & Zakat

Free Trade Agreement
Sharjah university – Taxation & Zakat

08 March 2020
Page 38

Sharjah university – Taxation & Zakat

GCC Customs Union
Sharjah university – Taxation & Zakat

08 March 2020
Page 40

Sharjah university – Taxation & Zakat

Lecture 07
Sharjah university – Taxation & Zakat

08 March 2020
Page 42

Greater Arab Free Trade Area

08 March 2020
Page 43

08 March 2020
Page 51

08 March 2020
Page 56

Temporary Imports

08 March 2020
Page 57

Temporary Imports
Sharjah university – Taxation & Zakat

08 March 2020
Page 61

What are Incoterms?
Why are they important?
Which parties are involved in determining the incoterms?
Most favorable incoterms for buyer?
Most favorable incoterms for seller?

Incoterms
Sharjah university – Taxation & Zakat

08 March 2020
Page 71

Customs valuation

08 March 2020
Page 72

Most local GCC countries’ legislation would equal the WTO valuation methods and its sequential application, barring interpretation or definition differences

About color themes
Choose the appropriate design theme for your presentation. The first two options on the design tab are correct EY themes, these two are the only ones that should be used. (1) light backgrounds for handouts; (2) dark backgrounds onscreen.
1
!
2
Customs valuation
Related party
Sharjah university – Taxation & Zakat
Establishing that a buyer and a seller are considered to be related parties, should not immediately lead to the transaction value being rejected. Instead, circumstances surrounding the sale should be examined in order to establish whether the relationship between the buyer and the seller has influenced the price (transaction value)
Based on WTO legislation, if the customs authorities has grounds for considering that the relationship influenced the price, it should communicate the grounds to the importer and must grant the importer a reasonable opportunity to respond. The transaction value between related parties should be accepted whenever the importer successfully demonstrates that the value closely approximates:
The transaction value in sales to unrelated buyers of identical or similar goods for export to the same country of importation; or
The customs value calculated based on the deductive method; or
The customs value calculated based on the computed method;
All while taking into account differences in commercial levels, quantity levels, packing, transport and insurance costs and all other costs which should have incurred by a buyer that is not related to a seller
Transfer pricing documentation may in some cases be used to support the abovementioned calculations, however, this cannot be considered officially accepted evidence

About color themes
Choose the appropriate design theme for your presentation. The first two options on the design tab are correct EY themes, these two are the only ones that should be used. (1) light backgrounds for handouts; (2) dark backgrounds onscreen.
1
!
2
Customs valuation
Related party
Sharjah university – Taxation & Zakat
Only if the importer is unsuccessful in demonstrating that the value was not influenced by the relationship between the buyer and the seller, the customs authority should reject the use of the transaction value method to calculate the customs value
Subsequently, the customs value of the goods should be calculated based on one of the other customs valuation methods in line of order. It is not allowed for the customs authority to amend the transaction value in order for it to be an acceptable customs value, without consulting whether one of the other customs valuation methods could be used to calculate the customs value first
Unfortunately, within the GCC practice, this methodology is not always consistently applied. Usually, a customs authority would be expected to accept the value that is invoiced by the seller, unless circumstances would give rise to suspecting the goods are seriously undervalued
If so, we understand from our experiences with the general practice that a customs authority would increase the value to an amount that would be acceptable from a customs perspective, rather than to (first) apply one of the other customs valuation methods in line of order. Although this new value would be presented to the importer to be accepted or not, the new value could only be challenged by taking the case to court, which we would generally not advise any business to do within the GCC region
As a result, we would recommend businesses importing goods into the GCC region to apply commercial values and retain sufficient documentation to support their customs value calculations, in order to provide as few occasion as possible to the customs authority to consider goods being undervalued and consequently to amend the customs value declared. EY would be able to assist in valuation manners prior and during discussions with any customs authority in the GCC region, including settlement advice

08 March 2020
Page 84

Customs broker management

08 March 2020
Page 85

08 March 2020
Page 90

08 March 2020
Page 93

Excise tax
Legislative framework
Sharjah university – Taxation & Zakat

Carbonated drinks – 50%
Any aerated beverage except for unflavored aerated water
Any concentrate, powder, gel or extract intended to be made into an aerated beverage

Tobacco & Tobacco products – 100%

All items listed within Schedule 24 of the GCC Common Customs Tariff

Electronic smoking tools and liquids – 100%

Sweetened beverages – 50%

Manufacturer / Stockpiler
Levies Excise
If Manufacturer / Stockpiler doesn’t levy, any other would be responsible to assess for Excise
Ultimate burden is on Consumer

Sharjah university – Taxation & Zakat

Designated Zone
Consumed / Retail sale from Designated zone

Energy Drinks

Energy Drinks
Sweetened beverages
Electronic smoking tools and liquids

Taxation and Zakat
University of Sharjah
Dr. Atia Hussain

Jan – May

About color themes

Choose the appropriate design theme for your presentation. The first two options on the design tab are correct EY themes, these two are the only ones that should be used. (

) light backgrounds for handouts; (2) dark backgrounds onscreen.

Course Program

Section

Week 1 (19 Jan): Introduction to Taxation & Zakat

Week 2 (26 Jan): Indirect tax – Customs

Week 3 (2 Feb): Indirect tax – Customs

Week 4 (9 Feb): Indirect tax – Customs

Week 5 (16 Feb): Indirect tax – Excise (18 Feb no lecture)

Week 6 (23 Feb): Indirect tax – Excise

Week 7 (1 Mar): Indirect tax – Conclusion and guest speaker

Week 8 (8-18 March Mid term exam)

Week 10 (22 Mar): Indirect tax – VAT

Week 11 (29 Mar): Indirect tax – VAT

Sharjah university – Taxation & Zakat

About color themes

1
!
2

01 March 2020
Page 1

Sharjah university – Taxation & Zakat

01 March 2020
Page 2

Lecture 01

01 March 2020
Page 3

Introduction to Taxation and Zakat in the
United Arab Emirates (UAE)
Zakat
Tax
Direct tax
Indirect tax
Corporate Income tax
Personal Income tax
Customs duty
Value Added Tax (VAT)
Excise tax

Sharjah university – Taxation & Zakat

01 March 2020
Page 4

Sharjah university – Taxation & Zakat

Introduction to Taxation and Zakat in the UAE
Basic structure/definitions
Zakat
Religious mode
Annual payments
Property/cash/gold
Rate: 2.5%

Sharjah university – Taxation & Zakat

01 March 2020
Page 7

Lecture 02 and 03
Page 8

01 March 2020
Page 8

GCC Customs Union
Referred Law/tariff book/Free Trade Agreement

Sharjah university – Taxation & Zakat

GCC Customs Union
Referred Law/tariff book/Free Trade Agreement

Sharjah university – Taxation & Zakat

01 March 2020
Page 10

Sharjah university – Taxation & Zakat

01 March 2020
Page 11

GCC Customs Union

Sharjah university – Taxation & Zakat

01 March 2020
Page 12

Sharjah university – Taxation & Zakat

01 March 2020
Page 14

UAE free zones customs regime
Example: Jebel Ali Free Zone Area (JAFZA)
All materials, products and equipment brought into JAFZA…
…are entering a duty free zone

Sharjah university – Taxation & Zakat

01 March 2020
Page 15

Sharjah university – Taxation & Zakat

01 March 2020
Page 16

Sharjah university – Taxation & Zakat

Lecture 04
Sharjah university – Taxation & Zakat

01 March 2020
Page 18

Sharjah university – Taxation & Zakat

01 March 2020
Page 21

01 March 2020
Page 22

Basics in Global Trade
Sample Certificate of origin
Sharjah university – Taxation & Zakat

01 March 2020
Page 23

Basics in Global Trade
Sample customs declaration/Bayan/Bill of entry
Sharjah university – Taxation & Zakat

01 March 2020
Page 24

Basics
Customs topics
Tariff classification
Origin of goods
Incoterms
Customs valuation
Temporary imports
Free Tarde Agreements
GCC free trade agreement
Greater Arab Free Trade Agreement

Sharjah university – Taxation & Zakat

01 March 2020
Page 25

Lecture 05
Sharjah university – Taxation & Zakat

01 March 2020
Page 26

Tariff Classification
Sharjah university – Taxation & Zakat

01 March 2020
Page 27

Customs
Tariff classification – why it is important

Sharjah university – Taxation & Zakat

01 March 2020
Page 28

Customs
Tariff classification – who is responsible

Sharjah university – Taxation & Zakat

01 March 2020
Page 29

Customs
Tariff classification – Harmonized System

Sharjah university – Taxation & Zakat

01 March 2020
Page 30

Customs
Tariff classification – Harmonized System

Sharjah university – Taxation & Zakat

01 March 2020
Page 31

Customs
Tariff classification – Harmonized System

01 March 2020
Page 32

Customs
Tariff classification – Harmonized System

Sharjah university – Taxation & Zakat

01 March 2020
Page 33

Lecture 06
Sharjah university – Taxation & Zakat

01 March 2020
Page 34

Origin
Sharjah university – Taxation & Zakat

01 March 2020
Page 35

Sharjah university – Taxation & Zakat

Free Trade Agreement
Sharjah university – Taxation & Zakat

01 March 2020
Page 38

Sharjah university – Taxation & Zakat

GCC Customs Union
Sharjah university – Taxation & Zakat

01 March 2020
Page 40

Sharjah university – Taxation & Zakat

Lecture 07
Sharjah university – Taxation & Zakat

01 March 2020
Page 42

Greater Arab Free Trade Area

01 March 2020
Page 43

01 March 2020
Page 51

01 March 2020
Page 56

Temporary Imports

01 March 2020
Page 57

Temporary Imports
Sharjah university – Taxation & Zakat

01 March 2020
Page 61

What are Incoterms?
Why are they important?
Which parties are involved in determining the incoterms?
Most favorable incoterms for buyer?
Most favorable incoterms for seller?

Incoterms
Sharjah university – Taxation & Zakat

01 March 2020
Page 71

Customs valuation

01 March 2020
Page 72

Most local GCC countries’ legislation would equal the WTO valuation methods and its sequential application, barring interpretation or definition differences

About color themes
Choose the appropriate design theme for your presentation. The first two options on the design tab are correct EY themes, these two are the only ones that should be used. (1) light backgrounds for handouts; (2) dark backgrounds onscreen.
1
!
2
Customs valuation
Related party
Sharjah university – Taxation & Zakat
Establishing that a buyer and a seller are considered to be related parties, should not immediately lead to the transaction value being rejected. Instead, circumstances surrounding the sale should be examined in order to establish whether the relationship between the buyer and the seller has influenced the price (transaction value)
Based on WTO legislation, if the customs authorities has grounds for considering that the relationship influenced the price, it should communicate the grounds to the importer and must grant the importer a reasonable opportunity to respond. The transaction value between related parties should be accepted whenever the importer successfully demonstrates that the value closely approximates:
The transaction value in sales to unrelated buyers of identical or similar goods for export to the same country of importation; or
The customs value calculated based on the deductive method; or
The customs value calculated based on the computed method;
All while taking into account differences in commercial levels, quantity levels, packing, transport and insurance costs and all other costs which should have incurred by a buyer that is not related to a seller
Transfer pricing documentation may in some cases be used to support the abovementioned calculations, however, this cannot be considered officially accepted evidence

About color themes
Choose the appropriate design theme for your presentation. The first two options on the design tab are correct EY themes, these two are the only ones that should be used. (1) light backgrounds for handouts; (2) dark backgrounds onscreen.
1
!
2
Customs valuation
Related party
Sharjah university – Taxation & Zakat
Only if the importer is unsuccessful in demonstrating that the value was not influenced by the relationship between the buyer and the seller, the customs authority should reject the use of the transaction value method to calculate the customs value
Subsequently, the customs value of the goods should be calculated based on one of the other customs valuation methods in line of order. It is not allowed for the customs authority to amend the transaction value in order for it to be an acceptable customs value, without consulting whether one of the other customs valuation methods could be used to calculate the customs value first
Unfortunately, within the GCC practice, this methodology is not always consistently applied. Usually, a customs authority would be expected to accept the value that is invoiced by the seller, unless circumstances would give rise to suspecting the goods are seriously undervalued
If so, we understand from our experiences with the general practice that a customs authority would increase the value to an amount that would be acceptable from a customs perspective, rather than to (first) apply one of the other customs valuation methods in line of order. Although this new value would be presented to the importer to be accepted or not, the new value could only be challenged by taking the case to court, which we would generally not advise any business to do within the GCC region
As a result, we would recommend businesses importing goods into the GCC region to apply commercial values and retain sufficient documentation to support their customs value calculations, in order to provide as few occasion as possible to the customs authority to consider goods being undervalued and consequently to amend the customs value declared.

01 March 2020
Page 84

Customs broker management

01 March 2020
Page 85

Customs broker management
Sharjah university – Taxation & Zakat
In the UAE, generally, customs brokers and agents undertake the indispensable function of preparing and filing customs entry documentation
To enable these third parties to fulfill this function in a manner consistent with the UAE customs and trade compliance objectives, it is essential that brokers are always provided with the information they need to do their job
This means, in relation to each and every customs declaration they file on business’s behalf, brokers must have clear directions on key entry data such as:
Tariff classification
Product value
Customs regime to which the products are being imported
Country of origin
It is preferred best practice that brokers or agents should not determine these matters on business’s behalf but, rather, always follow clear instructions provided by the business unit in whose name the import declaration is being lodged

01 March 2020
Page 90

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