FAQ On National In-Country Value Program (ICV)

The National In-Country Value Program (ICV)

With the introduction of In-country value program at UAE national level by Ministry of Industry and Advanced Technology (MOIAT), many entities have started adopting the ICV program as part of their strategic business plan and procurement process across different Emirates.

The program takes into consideration local expenditure on manufacturing, local products and services, local investments, and the hiring and development of Emiratis. It aims to support the national industry and redirect expenditure on procuring goods and services into the national economy.

As Entities are gearing up for implementing the ICV program in their respective organizations, we have prepared FAQs for the benefit of the management to assist them in smooth implementation of the ICV program.

Frequently Asked Questions

   1. What is the impact of ICV program being adopted at National level compared to earlier which was majorly adopted at Abu Dhabi emirate level?

ICV Program was introduced by Ministry of Industry and Advanced Technology at national level in the second half of 2021 which will be adopted by most of the government entities, large organisation, public and private companies across different Emirates in the due course, such entities are generally referred as participating entities.

Accordingly, the Companies supplying to these participating entities will be evaluated based on the ICV score and are then given an access to participating entities procurements during the contract awarding process. As the participating entities continue to increase exponentially, the requirements for having an ICV certificate also increases to maintain competitiveness while supplying to these large group of participating entities. 

   2. Do I need to obtain ICV certificate for my Company even if we are not supplying goods/ services directly to these participating entities? 

Tier I suppliers ( i.e. companies who are supplying the goods/ services directly to participating entities) who submit ICV certificate as part of their tender to the participating entities may have competitive edge to get awarded. To maintain a competitive edge, Tier I suppliers make all the efforts to improve their ICV score through various initiations and contributions to achieve the objective of the program. One such initiations include procurement of goods / services from local vendors particularly from local vendors with a better ICV score, subject to fulfilment of other technical and commercial requirements. Accordingly, Tier II and downstream suppliers are also required to obtain and improve their ICV score to maintain competitiveness and support for the improvement of ICV score of Tier I suppliers.

   3. How is the ICV score determined? 

ICV score is determined based on the formula in the ICV certificate template, which is filled based on the audited financial statements and the formula considers the following attributes:

• Goods Manufacture cost / Third Party spend cost

Score is computed based on the spends in local market and applying the applicable ICV% on such spends, the score under this attribute can range from 0% up to 50%]

• Investments in UAE

Score is computed based on Net Book Value of investments (Property, Plant and Equipment, Investment properties, CWIP, Investment property, Software development costs for IT companies). Depending on value of investments, score can range from 0% to 25%.

• Emiratization

Score is computed based on the salaries paid to Emirati employees through WPS (or through acceptable mode where WPS is not applicable) and based on the amount of salaries paid, score can range from 0% to 15%

• Expat contribution

Score is computed based on average number of expatriate employees employed during the year (and paid salaries through WPS or other acceptable mode where WPS is not applicable with additional supporting) and based on the head count the score can range from 0% to 10%.

• Bonus

Suppliers are also eligible for Bonus up to 5% which is computed based on components such as eligible Revenue from outside UAE, Emirati Headcount, and investment growth.

   4. Is there a minimum score to be achieved in order to obtain the ICV certificate? 

There is no minimum score to be achieved in order to obtain the ICV certificate and the score is computed based on the contribution made by the entity and recorded in the audited financial statements and assessed based on the attributes mentioned above in FAQ 3. 

   5. Is it mandatory to have the audited financial statements to obtain the ICV certificate. 

Yes, it is mandatory to have the audited financial statements prepared under IFRS unless it is a newly established entity (which is less than 10 months old). ICV score is determined based on the information filled in the ICV certificate template and such information should tally to the Audited Financial Statements or from the supporting documents used to prepare the Audited Financial Statements.

   6. Are there any specific factors to be taken into consideration in relation to Audited Financial Statements? 

Following are certain key consideration to be noted by the suppliers in relation to Audited Financial Statements:

• Financial Statements should be prepared under International Financial Reporting Standards (IFRS) and the audit report should be signed by an auditor approved by Ministry of Economy, UAE.

• Financial statements should not be older than 2 years from the certification year, i.e. for ICV certification in 2021, the audited financial statements to be considered shall not be older than 2019.

• For new established companies (less than 10 months old), who do not have audited financial statements, the Management accounts for a period of upto 9 months can be used in ICV calculations.

• ICV certificate shall be obtained for each license (legal entity) of the supplier. If the financial statements are consolidated / combined, then the management needs to segregate financial numbers for each entity/ license and prepare the ICV certification template.

• If the Company has multiple branches within and outside the emirates, then the financial information of branches in the same Emirate with identical activities and ownership are combined and one ICV certificate will be issued for the Company along with such branches in that Emirate.

• For Companies having industrial and commercial licenses, financial numbers from the audited financial statements shall be segregated at Industrial and Commercial license level and then consider the financial numbers of manufacturing operations for ICV certification for industrial license and so for commercial license. 

   7. What is the validity of the ICV Certificate?

The ICV Certificate shall be valid for a period of 14 months from the date of issuance of the audited financial statements. 

   8. Can the supplier get recertified during the validity?

Yes, the suppliers can get recertified (due to additional information relating any attributes such as vendor costs, ICV certificate of vendors, export revenue, expat costs etc.,) during the validity of the ICV certificate if he chooses to, using the same audited financial statements, but the validity of 14 months from the first issue will remain. 

   9. Can the entity incorporated outside UAE obtain ICV certificate?

Yes, the entities incorporated outside UAE can very well obtain the ICV certificate based on the fulfilment of other conditions such as audited financial statements under IFRS, etc., Attributes such as cost of goods and services procured by such entities from vendors within UAE, Emirati employees appointed by such entities, can favourably impact the ICV score of such entities. 

   10. Can the entity incorporated in Free Zone obtain ICV certificate? 

Yes, entities incorporated within Free Zones can obtain ICV certificate. Goods Manufacturer in Free Zone (i.e. having industrial license) are eligible for ICV score under all attributes. Service Provider in Free Zone are eligible for ICV score under all attributes except Investments and component of bonus computed based on export and investment growth. 

   11. Who are authorised to issue the ICV Certificate?

The ICV committee has authorized certain professional firms as ICV certifying bodies for the verification and issuance of the ICV Certificate. Crowe Mak, being one of the Certifying Bodies, proud to work and contribute to the successful implementation of the program. We have assisted several entities across the industries over the last 30 months in their ICV certifications.

For more information about ICV certification, kindly reach out to us at [email protected] or visit us at IN-COUNTRY VALUE PROGRAM | CROWE UAE