The National In-Country Value Program (ICV) aims to enable the Ministry of Industry and advanced technology to improve the performance and sustainability of the industrial sector, by increasing the contribution of local industries.
Because supporting local companies and their important role in advancing economic and social development as well as contributing to the growth of the country’s GDP.
The National ICV is a certificate issued to suppliers in which their contribution to the local economy is evaluated. The certified suppliers are then given an advantage during the award of contracts and purchases based on their ICV score.
Strategic Partners of the National ICV Program
The Program’s strategic partners comprise of a cluster of government entities and leading national companies in diverse fields, including the Program’s implementers, such as the Abu Dhabi Department of Economic Development (ADDED) represented by the Department of Government Support, which provides an umbrella for 62 local entities, Abu Dhabi National Oil Company (ADNOC) and Aldar Properties. A number of new partners are expected to join the Program in near future.
Objectives of the program
● Strategic localization of supply chains and the development of new local industries and services.
● Stimulating and attracting foreign investments, diversifying the economy, and increasing exports.
● Creating valuable job opportunities in the private sector.
● Contributing to the growth of national GDP.
● Enhance spending on R&D and advanced technology; and
● Increase the private sector’s contribution to national GDP.
Who needs an ICV Certificate?
An ICV Certificate may be obtained by any company inside or outside UAE, in accordance with the ICV guidelines. As part of the National ICV Program, Tier 1 suppliers (suppliers directly providing goods or services to the Partners of the Program) may be required to declare their ICV Score as this is an integral part of their tender evaluation and award process. Tier 2 and below suppliers may also be required to provide their ICV Certificate to ensure competitiveness in their tenders with Tier 1 suppliers.
Key considerations for obtaining an ICV Certificate
1. Audited Financial Statements, prepared in accordance with IFRS and not older than two years from the certifying year, and signed by a licensed auditor from the UAE Ministry of Economy.
2. ICV certificate shall be obtained for each license (legal entity) of a company. However, if a company has different branches in the same Emirate with identical activities and ownership, then a combined ICV certificate will be issued for the Company in that Emirate.
3. For companies with manufacturing and commercial licenses, all the accounting records must be split between manufacturing and commercial activities; ICV certificate will be issued for each license separately.
4. For companies that are less than 10 months old and do not have audited financial statements, management accounts for a period of up to 9 months can be used for the ICV certification purposes.
Validity of the ICV Certificate
The ICV Certificate is valid for a period of 14 months from the date of issuance of the audited financial statements.
Is it possible to obtain an ICV Certificate at the combined or consolidated level?
The ICV Certificate shall be obtained for each individual license and thus each legal entity within a group would be required to obtain a separate ICV Certificate. In case of combined or consolidated financial statements, proper disclosures about the group entities along with the related breakdown of assets, liabilities, revenues and costs for each legal entity is required.
National ICV Formula
Below are the components of ICV Calculation Formula:
(a) Goods Manufacturer – Supplier who manufactures and supplies a finished product to an external customer. A Supplier holding the Industrial License in UAE shall be considered as Goods Manufacturer.
For a Supplier who is a Goods Manufacturer, the following attributes will be considered:
● Goods Manufacture cost
● Investment in UAE
● Emiratization,
● Expatriate contribution
● Bonus – Revenue from outside UAE, Emirati Head counts & Investment Growth
(b) Service Provider – Any Supplier who is not a Goods Manufacturer is considered as “Service Provider”. A Supplier who has a license other than “Industrial License” shall be considered as Service Provider.
For a Supplier who is a Service Provider, the following attributes will be considered:
● Third Party Spend cost
● Investment in UAE
● Emiratization,
● Expatriate contribution
● Bonus – Revenue from outside UAE, Emirati Head counts & Investment Growth
(c) A Supplier who is an Agent / Trader will be considered as “Service Provider”.
● However, an Agent trading exclusively only one principal Goods Manufacturer in UAE shall be considered as Goods Manufacturer.
● The ICV Certificate Template consists of a Microsoft Excel file with tabs dedicated to each of these attributes, wherein the Supplier has to fill the figures from the Audited Financial Statements as explained in subsequent pages of these guidelines.
● Throughout these Supplier guidelines, the page number headings correspond to the separate tabs which have been incorporated into the “ICV Certificate Template” that is used to calculate the ICV% of Supplier.
Supplier is required to add the following details in the template:
Section A – Company General Information
1. Name as per License – name of the Supplier as mentioned in License
2. License Number
3. Address as per License
4. Contact Person details:
● Name
● Office Tel number
● Mobile number
5. Company Type – choose the appropriate type from the drop-down list:
● Small Medium Enterprises (SME) in UAE
● Non-SME in UAE
● International Company
6. Company based in – choose the appropriate type from the drop-down list:
● Within UAE
● Outside UAE
7. Financial Year End Date – Supplier shall fill the end date of the financial year based on which the ICV certification is being applied for. An ICV certificate cannot be issued 2 years after this date. The date shall be entered in (mm/dd/yyyy) format
8. Audited Financial Statements Issue date – Supplier to enter the date of issuance of the Audited Financial Statements. The ICV certificate will be valid for 14 months from this date. The date shall be entered in (mm/dd/yyyy) format.
9. Company Business – choose the appropriate type from the drop-down list:
● Goods Manufacturer
● Service Provider
Section B – In-Country Value details
● This Section is protected and Supplier shall not enter any information in this Section.
● The results are auto-calculated based on the figures entered by the Supplier in subsequent tabs.
● The validity date of the ICV score is auto calculated as per Section 3(c) of these guidelines.
● This page shall bear the e-signature of Suppliers’ Power of Attorney or any senior /authorized signatory Company stamp and date; and Certifying Body representative’s e-signature, Designation, Company Stamp and date.
● This Page duly e-signed by the Supplier’s POA or authorized executive and Empaneled Certifying Body representative shall be considered as Supplier’s Company ICV Certificate.
General Questionaire
● All Suppliers shall fill in the general questionnaire based on the reported financial year.
● The details provided in the general questionnaire are only for Participating Entities’ information and will not affect the ICV score calculations
Good Manufacturing
Supplier shall fill the following:
1. Goods Description Supplier has to list all Goods manufactured by Supplier in the latest audited financial year, in broad categories. If there are multiple goods falling under same or similar category, these can be combined together as one-line item in the template.
2. Total cost Supplier shall provide the breakdown of total costs for each goods listed in the table. The breakdown shall be as follows:
● Total cost will be split into:
✓ Within UAE cost – All costs incurred within UAE
✓ Outside UAE cost – All costs incurred outside UAE
● “Within UAE” & “Outside UAE” cost shall be further split into:
✓ Third Party Cost – All cost paid to third party companies
3. Internal Cost – Only Depreciation / Amortization cost of Assets to be considered
Third party cost under “Within UAE” – This shall be further split into:
1. Goods Manufacturer – Company holding Industrial license
● Supplier shall enter the name of the Manufacturer, Location of the Manufacturer (one of the seven Emirates in UAE) and the cost of purchases from the Manufacturer.
● The cost of purchases from UAE Manufacturer will be considered as 100% incurred ‘within UAE’
2. Service Provider – Company holding a license other than Industrial license.
● Supplier to enter the name of the Agent/Service Provider, Location of the Service Provider (one of the seven Emirates in UAE), cost of purchases and ICV% of the Service Provider.
● In case of “Within UAE” cost will be calculated by multiplying cost of purchases from the Agent/Service Provider with ‘50%’ or ‘ICV% of the Agent/Service Provider’, whichever is higher.
For Third party Service Providers for Utility and other Services in UAE, the following shall be considered:
Services ICV
● Water / Electricity – 80%
● Fuel – ICV of the provider
● Rent paid for Property/Land from individuals or Companies – 80%
● Telecom Providers – As per the ICV of the provider
● UAE Government charges – Directly paid to Government
or through Government licensed entities – 100%
● Payment to Governmental Free Zone authorities in UAE – 100%
Third Party cost under “Outside UAE”:
In this Section, Supplier shall provide the name of the Manufacturer/ Agent/ Service Provider, cost of purchases and ICV% of the Manufacturer/ Agent/Service Provider.
1. The following shall not be included as part of the costs:
● Management Fee
● Sponsorship fees
● Governmental Fines / Penalties
● Charity amount/ expenses for Corporate Social Responsibility
2. While considering the vendors from Free Zone, the following shall be noted:
● “Goods Manufacturers” based in Free Zone will be considered as “Within UAE”
● “Service Providers” based in Free Zone will be considered as “Outside UAE”
3. ICV Calculation
The ICV is calculated as follows:
(Total ICV value) + Emirati cost (Page-5) + 0.6 x Expat cost (Page-6)
———————————————————————————————————————— x 0.5
(Total Cost)
Third Party Cost
a. Goods/Services Description
Supplier has to list out all the Goods/Services procured by him in the previous financial year in broad categories. If there are multiple goods falling under same or similar category, it can be combined together as one-line item in the template. For example – different specifications of valves procured could be combined as one-line item titled “Valves”.
b. Supplier Name
Supplier shall indicate the “Vendor name” who has supplied the goods
c. Cost of Goods purchased
Supplier shall provide the Cost of Goods (Cost of Sales) purchased from the Vendor.
d. Vendor ICV%
Supplier shall indicate the ICV% of the Vendors. This should be backed up with ICV certificates of Vendors issued by one of the Empanelled Certifying bodies. For the purpose of ICV calculation only, a vendor who is based in UAE mainland will be automatically granted 10% ICV score. For all other vendors, the ICV score shall be considered as zero (0) if they do not have valid ICV certificate.
All operating costs like Water / Electricity, Fuel, Rentals of property/equipment, Telecom and Government charges shall be considered in the Third Party spend.
Vendors from whom such services are procured will have their ICV’s as under:
Services ICV
● Water / Electricity – 80%
● Fuel – ICV of the provider
● Rent paid for Property/Land from individuals or Companies – 80%
● Telecom Providers – As per the ICV of the provider
● UAE Government charges – Directly paid to Government
or through Government licensed entities – 100%
● Payment to Governmental Free Zone authorities in UAE – 100%
e. While considering the vendors from Free Zone, following to be noted:
● “Goods Manufacturers” based in Free Zone will be considered as “Within UAE”
● “Service Providers” based in Free Zone will be considered as “Outside UAE”
f. The following shall not be included as part of the costs:
● Management Fee
● Sponsorship fees
● Penalties
● Charity amount/ expenses for Corporate Social Responsibility
g. Depreciation/ Amortization cost of Assets can be considered in the table with 100% ICV
h. ICV Calculation
[Goods/Services 1 x ICV% of Vendor 1 + Goods/Services 2 x ICV% of Vendor 2 + Goods/Services 3 x ICV% of Vendor 3…Goods/Services n x ICV % of Vendor n] + Emirati cost + 0.6 x Expat cost
——————————————————————————————————————————————————– x 0.5
(Total Cost)
Investment
a. Supplier shall fill the UAE Assets Net Book Value (AED) in the previous Financial Year. This figure is used to calculate the Investment Growth bonus.
b. Owned Assets Description
Fixed Assets owned by Supplier as per the Audited Financial Statements along with the location (i.e., Inside UAE or Outside UAE) Fixed Assets will include the following categories:
1. Property, Plant and Equipment (including any ERP costs)
2. For IT companies, software development costs will also be included
3. Capital Work in progress
4. Investment Property
All other intangibles shall be excluded from investments
The investments outside the UAE shall also be reflected appropriately in the ICV Certificate Template.
In case Supplier has revalued their Property, Plant and Equipment, the value of the Property, Plant and Equipment shall be reduced by the extent of the balance in the revaluation reserve at the Balance Sheet date.
c. Net Book Value
For all the assets listed, Supplier shall provide the Net Book Value as per the Audited Financial Statements.
d. Location
Supplier shall select one of the locations from the value list – “Inside UAE” or “Outside UAE”
e. ICV Calculation:
The ICV is calculated as follows:
Net Book Value of Assets in UAE
————————————————- x 0.1 (weightage 10%)
Net Book Value of Total Assets
plus
15% on progressive basis from Asset NBV of AED 5 million to AED 150 million.
Emiratization
a. Supplier shall fill the following for direct staff Emiratis, who are on Supplier’s payroll:
● Number – Average Number of Emirati employees in Supplier’s payroll (Wage Protection System – “WPS” where applicable) in the year as per Ministry of Human Resources and Emiratization (MOHRE) statistical report. Where statistical report is not available, consider the employees as per salary transferred documents.
● Annual Salary + Benefits (AED) – Salary + Benefits as per the Financial Statements (includes all benefits paid to direct Emirati staff including salaries, allowances and other benefits). Only salary and benefits of those Emiratis who are included in the Wage Protection System (WPS) shall be considered in ICV. Benefit for Emiratis working abroad will also be considered as Emiratization Benefit.
● Donations to Sondoq Al Watan / Government Universities (AED) – Donations made to Sondoq Al Watan or any of the universities listed in https://www.adek.gov.ae/Education-System/Higher-Education/List-of-Higher-Education-Institutions-in-Abu-Dhabi One Third (1/3) of the donations made to these universities will be eligible for the benefit in Emiratization. Remaining portion will not be included in the template cost and will be treated as reconciliation cost to the audited financials.
● Annual Training Expenditure (AED) – Training Expenditure (includes spend by Supplier on external training provided to direct Emirati staff. Cost incurred on internal training courses shall not be included). External Training Costs incurred overseas will also be eligible for the benefit. Only expenditure included in Audited Financial Statements shall be considered for ICV.
b. Any sponsorship / management fees paid to Emiratis outside of WPS shall not be considered.
c. Salary of Emirati owners of the Company (as per ownership in the License) who are part of the WPS can be included, however it shall be capped to a total of AED 200,000/- monthly per owner. Bonuses or other benefits shall be excluded from the calculations.
d. Free Zone companies who are not registered in the WPS system, shall provide documentary evidence from Free Zone authority on the details of employees, in order to consider the number and salary / benefits in the calculations.
e. ICV Calculation:
With regards to Annual Salary, benefits & training for total Emirati employees, the ICV is calculated as follows:
Up to 200K AED – 2%
and
Progressive up to 20 M AED Annual Salary – 15%
Expat Contribution
a. Supplier shall fill the following for direct staff Expats, who are on Supplier’s payroll:
1. Average Number of Expatriate employees in Supplier’s payroll (Wage Protection System – WPS where applicable) in UAE in the year as per Ministry of Human Resources and Emiratization (MOHRE) statistical report. Where statistical report is not available, consider the employees as per salary transferred documents.
2. Salary + Benefits (includes all benefits paid to direct Expatriate staff including salaries, allowances and other benefits) included in Audited Financial Statements. Only salary and benefits of those Expats who are included in the Wage Protection System (WPS) shall be considered in the ICV.
3. Training Expenditure (includes spend by Supplier on external training provided to direct Expatriate staff. Cost incurred on internal training courses shall not be included). Only expenditure included in Audited Financial Statements shall be considered for ICV.
4. Training Expenditure (includes spend by Supplier on external training provided to direct Expatriate staff. Cost incurred on internal training courses shall not be included). Only expenditure included in Audited Financial Statements shall be considered for ICV.
b. Free Zone companies who are not registered in the WPS system, shall provide documentary evidence from Free Zone authority on the details of employees in order to consider the number and salary / benefits in the calculations.
The ICV for Expat contribution is calculated as follows:
Number of Expats ICV %
1 to 5 – 1 to 3%
6 to 50 – 4 to 6 %
51 to 200 – 7 to 9%
Above 200 – 10%
Revenue
a. Supplier needs to indicate the Revenue “from UAE Customers” and “from Outside UAE Customers” in AED.
b. Revenue from Free Zone companies will be considered as “from UAE Customers”.
c. With regards to “from Outside UAE Customers”, Supplier shall provider the breakdown as follows:
1. Re-Exports – Revenue earned from re-exports i.e., when the imported goods are sold to outside UAE customers without any “value addition”
2. Exports excluding Re-exports – Revenue earned from outside customers after value addition within UAE by Supplier.
Bonus
a. Revenue from outside UAE
Only Supplier’s legal entities who are based in UAE are eligible for this bonus:
Total Annual Revenue from outside UAE customers excluding Re-exports
—————————————————————————————————– x 5%
Total Annual revenue (from inside + outside UAE)
The revenue from outside UAE shall be considered only when the payment is received by the Supplier from outside UAE.
b. Emirati Head count
Number of Emiratis who are enrolled in the WPS will be considered for bonus. It is calculated as follows:
Number of Emiratis /100 x 5%
c. Investment Growth
Growth % in Net Book value of Assets in last two Financial Years (current Audited Financial Statements versus Audited Financial Statements of previous year) is included in bonus.
The formula is as under:
(Net Book value of UAE Assets in current FS – Net Book value of UAE Assets in audited Financial Statements of previous year)
————————————————————————————————————————————————- X 5%
Net Book value of UAE Assets in audited Financial Statements Of previous year
The total of all components – (a) Revenue from outside UAE Bonus, (b) Emirati Headcount and (c) Investment Growth shall not exceed 5%.
After filling in the templates, Supplier shall verify all details and ensure alignment with Supplier’s Audited Financial Statements, it is recommended that Suppliers engage their Finance and other concerned staff to verify the figures.
The certificate when:
1. Duly e-signed and stamped by the company’s Power of Attorney or senior /authorized signatory (and)
2. Duly verified and endorsed by one of the ICV Empaneled Certifying Bodies becomes the ICV certificate valid till the date mentioned in the ICV certificate.
FOR MORE INFORMATION, CONTACT US :
Phone : +971 52 1952 532 / +971 4 240 1110
Mail-Id : info@yugaaccounting.com
Website : www.yugaaccounting.com