VAT MULTIPLE CHOICE QUESTIONS

1. A UAE company provides both taxable and exempt supplies. In the

first quarter of the tax year, how should the UAE company apportion
the input VAT when all of its expenses are related to both types of
supplies? Assume that the UAE company does not use special
apportionment method.
a. Claim the full amount of input VAT incurred
b. Claim input VAT only for taxable supplies and exclude exempt supplies
c. Apportion input VAT based on the ratio of taxable to total supplies
d. Do not claim input VAT

“All of its expenses are related to both types of supplies” – The input VAT
on all such expenses shall be considered under mixed/residual category
subject to partial recovery. Further, since the company does not use any
special apportionment method, the standard method will be used to
apportion the residual tax i.e. ratio of [wholly recoverable/ (wholly
recoverable + wholly non recoverable)]
None of the above options are correct.
Apportionment shall be done with standard method only when special
apportionment method is not used.

2. What is the VAT treatment for a supply of goods under a consignment

arrangement where the title of the goods does not transfer until the
goods are sold by the consignee?
a. The VAT should be charged when the goods are consigned
b. The VAT should be deferred until the goods are sold by the consignee
c. The VAT should be charged when the goods are received by the consignee
d. The VAT should be charged when the consigned goods are delivered to the
consignee

Mere delivery of receipt of goods shall not trigger the date of supply
provisions. The VAT liability in case of consignment sales shall arise only
when the goods are accepted by the recipient (ownership is accepted) or
at expiry of 12 months from the delivery whichever is earlier.

3. A UAE company provides bank account opening services to a non-

resident individual based in Luxembourg. The individual went to the
UAE for 2 months for a holiday getaway, and his presence was not
related to the UAE company’s services. How should the UAE company
treat this transaction for VAT purposes?
a. Charge UAE VAT at 5%
b. Zero-rate the supply since it is an export of services
c. Exempt the supply from VAT
d. Apply the reverse charge mechanism

The place of supply in the given case shall be the place of residence of the
supplier i.e. UAE. Further, as per article 31 of VAT regulations, since the
recipient of services does
Dubai Mainland DMCC ADGM
Office 08, Al Gurg Tower 3 Office 28, Armada Tower 2 Office 202, 11th Floor Al Sarab Tower
Baniyas Road, Rigga Al Buteen Cluster P, Jumeirah Lake Towers Abu Dhabi Global Market Square
Dubai, UAE Dubai Multi Commodities Centre Al Maryah Island, Abu Dhabi, UAE
P.O. Box 28242 Dubai, UAE P.O. Box 28242
P.O. Box 28242
+971 (0) 4 294 +971 (0) 4 399 +971 (0) 2 812
9203 0163 4105
[Link]
 not have a place of residence in UAE and his presence is not closely linked
to the services received, the supply shall be subject to zero rated VAT.
Bank account services are covered under financial services guide where
services provided to a non-resident person are to be considered as export
of services.

4. What is the correct VAT treatment if the Company provides a mixture

of standard-rated and exempt services as a single composite supply?
a. The entire supply should be treated as standard-rated
b. The entire supply should be treated as exempt
c. The supply should be apportioned, and VAT to be applied accordingly
d. The VAT treatment depends on the principal supply within the composite
supply

Ref: Article 46 of VAT regulations

5. An engineering company provides design services to a Swiss

company. The designs will be used by the Swiss company for the
construction of a pipeline located in Switzerland. How should the VAT
be treated?
a. The entire service should be zero-rated
b. VAT should be charged on the portion of the service performed within the
UAE.
c. The entire service should be standard rated at 5%
d. The entire service should be outside the scope of UAE VAT.

Place of supply of real estate related services shall be the place where such real
estate is located i.e. engineering work permanently attached to land in
Switzerland, therefore, out of scope of VAT>

6. A UAE business sold commercial properties to its related party for no

consideration. The related party is situated in the UAE and not
registered for VAT. How should VAT be accounted for in this situation?
a. No VAT is applicable since there is no consideration involved
b. No VAT is applicable since the transfer qualifies as a transfer of going
concern
c. VAT should be charged based on the market value of the properties
d. VAT should be calculated based on the book value of the properties

Ref: Article 36 of VAT decree law – value of supply for related parties.

VAT CASE STUDY QUESTIONNAIRE (PLEASE CHOOSE TWO)

1. Seattle Greys is a technology firm with warehouses in the Jebel Ali

Free Zone and Mainland UAE. It manufactures hardware used by
businesses in their supply chain management systems. The hardware
is manufactured in the UAE, and materials are imported from
suppliers located in
Dubai Mainland DMCC ADGM
Office 08, Al Gurg Tower 3 Office 28, Armada Tower 2 Office 202, 11th Floor Al Sarab Tower
Baniyas Road, Rigga Al Buteen Cluster P, Jumeirah Lake Towers Abu Dhabi Global Market Square
Dubai, UAE Dubai Multi Commodities Centre Al Maryah Island, Abu Dhabi, UAE
P.O. Box 28242 Dubai, UAE P.O. Box 28242
P.O. Box 28242
+971 (0) 4 294 +971 (0) 4 399 +971 (0) 2 812
9203 0163 4105
[Link]
 the Designated Zones, Mainland UAE, and outside the UAE. Seattle
Greys ships goods from its factory to customers located in the
Designated Zones, Mainland UAE, and outside the UAE.

Following is the information for transactions recorded in the VAT period ending
31 March 2023:

Sales

Customer Place of Origin Place of Net Amount

Location Destination
UAE Customers Mainland UAE Mainland UAE AED 200,000
Non-UAE Mainland UAE Spain AED 150,000
Customers
Non-UAE JAFZA DMCC AED 300,000
Customers
Non-UAE Spain China AED 350,000
Customers

Purchases

Supplier Place of Origin Place of Amount

Location Destination
UAE Supplier Mainland UAE Mainland UAE AED 100,000
UAE Supplier Dubai Airport Mainland UAE AED 100,000
Free Zone
UAE Supplier Dubai Airport JAFZA AED 150,000
Free Zone
Non-UAE Supplier Spain Mainland UAE AED 175,000

Assumption: The buyer is the importer on records.

a. Explain the taxability of the supply of goods from a VAT perspective.

b. Explain and calculate the payable VAT to be reported in the VAT return. –
5,000/-
c. Explain and calculate the claimable VAT to be reported in the VAT return. –
18,750/- (Box 6 and Box 9)
d. Explain the concept of ‘importer of record’ and what this means for
Customs Duty and Import VAT. –
Importer on record is the person responsible for importing the goods in the
country and carry out the customs compliances. The importer on record
can either be the owner of the goods or any other designated person
assigned to complete the customs clearance process.
The owner of the goods has to bear the customs duty and the RCM VAT.
Where the customs compliances are done by any other person on behalf of
the owner of the goods, an adjustment needs to be done in the VAT return
for import of goods.

Dubai Mainland DMCC Sales:

ADGM
Office 08, Al Gurg Tower 3 Office 28, Armada Tower 2 Office 202, 11th Floor Al Sarab Tower
Baniyas Road, Rigga Al Buteen Cluster P, Jumeirah Lake Towers Abu Dhabi Global Market Square
Dubai, UAE Dubai Multi Commodities Centre Al Maryah Island, Abu Dhabi, UAE
P.O. Box 28242 Dubai, UAE P.O. Box 28242
P.O. Box 28242
+971 (0) 4 294 +971 (0) 4 399 +971 (0) 2 812
9203 0163 4105
[Link]
1. Mainland to Mainland – The place of supply for such local sale shall be the
place where the supply was made i.e. UAE. Further since such supply is not
covered under any zero rating provisions, it shall be subject to standard rated
VAT = 200,000*5%= 10,000

2. Mainland to Spain – The place of supply shall be in UAE where the supply
includes exporting of goods to a place outside the UAE. Therefore the supply
shall be subject to 0% VAT

3. JAFZA to DMCC – Buyer being imported on record, the supply has taken place
in JAFZA only. Assuming that the purchaser has provided a declaration for non-
consumption within JAFZA, the supply shall be treated as out of scope of VAT. The
recipient shall report the transaction under reverse charge mechanism – box 6 of
the VAT return.

4. Spain to China – The place of supply shall be outside the UAE. Therefore the
supply shall be out of scope of VAT.

Purchases:

1. Mainland to Mainland – 100,000*5% = 5,000 (box 9)

2. DAFZA to mainland – 100,000*5% = 5,000 (box 6 and Box 10)
3. DAFZA to JAFZA – 150,000 – out of scope of VAT
4. Spain to mainland – 175,000*5% = 8,750 (box 6 and Box 10)

VAT return summary:

Particulars Description Total

Box 1 Standard rated sales 10,000
Box 6 Import of goods - RCM 13,750
Box 9 Standard rated purchases (5,000)
Box 10 RCM input VAT (13,750)
Total VAT liability 5,000

Dubai Mainland DMCC ADGM

Office 08, Al Gurg Tower 3 Office 28, Armada Tower 2 Office 202, 11th Floor Al Sarab Tower
Baniyas Road, Rigga Al Buteen Cluster P, Jumeirah Lake Towers Abu Dhabi Global Market Square
Dubai, UAE Dubai Multi Commodities Centre Al Maryah Island, Abu Dhabi, UAE
P.O. Box 28242 Dubai, UAE P.O. Box 28242
P.O. Box 28242
+971 (0) 4 294 +971 (0) 4 399 +971 (0) 2 812
9203 0163 4105
[Link]
2. Mr. Cinco is a sole director and UAE tax resident of Los Pollos
Hermanos Ltd (“the Company”), an entity incorporated in Dubai, UAE.
The Company provides marketing support services to its parent
entity located in Portugal. Mr. Cinco is also a director of the parent
entity.

The Company received approval from the FTA on the exception from
the VAT registration application on 1 January 2018. The Company
declared in its letter that it has no and does not expect to generate
taxable sales and imports at 5% VAT. Since the Company received an
exception approval from the FTA, it does not file VAT returns.

Every year, the Company generates AED 1,000,000 from the

marketing support services to its parent entity.

Provide your view to be taken to determine the VAT position of the above case,
including the potential consequences and actions that must be taken by the
Company.

3. The Company is into providing equipment for rent and event

management to its customers based out of UAE, KSA, Kuwait, and
Germany for events to be undertaken in UAE, KSA, and the UK. The
Company’s activities involve the following services:

 Leasing /renting of rigging equipment, along with qualified

technicians
 Supplying technicians for operating any of the rigging equipment
 Sale of rigging equipment

Provide your view to be taken to determine the VAT position for the following:

a) Rental of rigging equipment to a client based in UAE for an event in the UK –

Subject to 0% VAT since place of supply shall be the place of residence of
the supplier i.e. UAE and covered under zero rating provisions – article 31 of
VAT regulations – Services actually performed outside the UAE.
b) Rental of rigging equipment to a client based in KSA for an event in the UAE
– In continuation to the above case, place of supply in UAE and since the
rental service are provided in the UAE, the supply shall be subject to 5%
VAT.
c) Providing qualified technicians for the operation of rigging equipment for an
event in the UK – Place of supply shall be the place where such operation
took place – i.e. UK (special place of supply rules – article 30 of VAT decree
law) Therefore, out of scope of VAT.
d) Sale of rigging equipment to a KSA-based customer for an event to be held
in KSA (incoterms Ex-works Dubai) – The supply shall be considered as
indirect export where the customer will get the ownership of the goods
within the UAE but transfer the goods eventually outside the UAE. The
supplier shall get the
Dubai Mainland DMCC ADGM
Office 08, Al Gurg Tower 3 Office 28, Armada Tower 2 Office 202, 11th Floor Al Sarab Tower
Baniyas Road, Rigga Al Buteen Cluster P, Jumeirah Lake Towers Abu Dhabi Global Market Square
Dubai, UAE Dubai Multi Commodities Centre Al Maryah Island, Abu Dhabi, UAE
P.O. Box 28242 Dubai, UAE P.O. Box 28242
P.O. Box 28242
+971 (0) 4 294 +971 (0) 4 399 +971 (0) 2 812
9203 0163 4105
[Link]
 export documents i.e. customs declaration, bill of lading and exit certificate
from the customer to prove the export of goods reportable under box 4 of
VAT return.
e) Any tax optimization option available with the Company.

4. Gringotts Bank FZ LLC (the “Company”) is a banking institution

based in Diagon Alley Dubai, UAE. They are registered under UAE VAT
laws. They have a parent Company – Goblin Inc, Geneva (the “Parent
Company”). The Parent Company owns commercial space in Dubai.
The Parent Company has rented out this premise to the Company.

You are a Tax Manager at Re/think, and you have to advise on whether the
Parent Company is required to register under UAE VAT law.

In case the Parent Company is required to register, suggest ways (if any) to
better structure the transactions for VAT optimization.

Dubai Mainland DMCC ADGM

Office 08, Al Gurg Tower 3 Office 28, Armada Tower 2 Office 202, 11th Floor Al Sarab Tower
Baniyas Road, Rigga Al Buteen Cluster P, Jumeirah Lake Towers Abu Dhabi Global Market Square
Dubai, UAE Dubai Multi Commodities Centre Al Maryah Island, Abu Dhabi, UAE
P.O. Box 28242 Dubai, UAE P.O. Box 28242
P.O. Box 28242
+971 (0) 4 294 +971 (0) 4 399 +971 (0) 2 812
9203 0163 4105
[Link]
5. You are a Tax Manager at Re/think, and you have been asked by one
of the Finance Managers to review a VAT return; they have had some
issues with the VAT Sales Reconciliation and the VAT Liability
reconciliation and have highlighted in red where a difference exists.
This is the client's first VAT return since the introduction of VAT in
the UAE from Jan 2018 to March 2018.

The Finance Manager has included the VAT Audit report, the General Ledger
Activity Report, and the Trial Balance in the attached file, carry out a review of
the report and highlight any potential errors on the VAT Audit report (Green
Tab). Please show how any of the errors found will affect the VAT Sales
Reconciliation and the VAT Reconciliation and demonstrate that the
corrections will result in both reconciling.

The Finance Manager is also unsure of why these reconciliations are

necessary; in the first instance, please draft a brief response explaining the
need for the reconciliations and what type of errors they can potentially
expose.

Please see the attachment named VAT Review File and provide your
answers below.

The additions made in the VAT return file have been highlighted in green for easy reference.

For each VAT return, accurate accounting serves as the foundation. Conducting revenue and VAT
reconciliations allows the tax manager to detect any errors made in recording transactions during the
tax period.

Moreover, during a tax audit, the FTA auditor's primary focus is the reconciliation of revenue—
ensuring that the revenue reported in the Trial Balance (TB) aligns with the revenue declared in the
VAT return. Any discrepancies between the two must be identified by the tax manager, who should
provide appropriate explanations, such as out-of-scope sales, deferred revenue, or manual
adjustments, as applicable.

Reconciliation of VAT ledgers helps the tax manager spot instances where incorrect tax codes may
have been used during data entry. In such cases, the description or narration of the entry becomes
crucial, as tax managers typically rely on ledger accounts, descriptions, and tax codes for accurate
reporting.

Dubai Mainland DMCC ADGM

Office 08, Al Gurg Tower 3 Office 28, Armada Tower 2 Office 202, 11th Floor Al Sarab Tower
Baniyas Road, Rigga Al Buteen Cluster P, Jumeirah Lake Towers Abu Dhabi Global Market Square
Dubai, UAE Dubai Multi Commodities Centre Al Maryah Island, Abu Dhabi, UAE
P.O. Box 28242 Dubai, UAE P.O. Box 28242
P.O. Box 28242
+971 (0) 4 294 +971 (0) 4 399 +971 (0) 2 812
9203 0163 4105
[Link]