We note that a UAE onshore LLC having an Industrial Production licence (“IPL”) may be exempted from custom duties on its manufactured goods being imported into any GCC country. This may be possible upon obtaining a certificate of origin (“COO”) and a value added certificate (“VAC”) for such manufactured goods from the MOE.
With respect to the VAC, the MOE sets out a number of conditions that must be satisfied, including that at least forty percent (40%) of “value” must be added to the goods during the manufacturing process taking place in the UAE.
Based on our experience, we set out below the common pitfalls that clients must be aware of as clarification, at the time of submitting the relevant information through the online portal of the MOE, for the purpose of calculating the percentage of local production entitling the UAE onshore LLC having an IPL to obtain the VAC:
- The client must provide the information relating to the salaries and wages of all employees for the purpose of calculating the percentage of the value added.
- The information to be used for products of “local origin” is the information about the products purchased from a company (factory/plant) having an IPL in the UAE and the GCC. This excludes products purchased from a free zone company (factory/plant) that does not hold an IPL issued by the relevant competent authority in the jurisdiction of its incorporation in the GCC (e.g. MOE in the UAE). This means that any products purchased from a company that does not fall within the requirements mentioned above, is deemed a foreign product, regardless of whether such product is purchased in the UAE local market or otherwise. The MOE usually reviews and verifies the invoices of products being purchased in order to confirm the accuracy of the amount when calculating the percentage of the value added.
- The information to be used for “the Admin & General Expenses” category is the global number for all such expenses to be provided for the purpose of calculating percentage of the value added.