Zeyto Academy · Core · Module 43
Progress billing, retention and VAT
Bill by percent complete, withhold and release retention, recover advances, handle variations and UAE VAT (Zeyto Construction & Contracting, pre-release).
You will be able to
- Set the contract terms that drive billing
- Take a progress bill from percentages to tax invoice and compute its figures
- Calculate retention, the cap and the release invoice, and know the VAT time-of-supply points
- Split an advance, recover it on each bill and close it on the final bill
- Handle variations, delay damages and deductions with the right VAT
- Prepare a final account and read receivables
The contract terms that drive every bill
- A contract is a sales order that posts nothing; its terms drive every bill.
- A bill is the percent complete of each contract item, guarded against 100%, approved progress and unapproved variations.
- Retention, advance recovery and deductions sit between work done and cash due.
From progress bill to tax invoice
- Statuses: draft, percentages entered, PM approved, client certified, invoiced, part paid, paid.
- VAT is charged on gross less retention; advance VAT is reversed pro rata.
- Short certification scales the lines and records what is carried, disputed or written off.
Retention held and released
- Retention = certified gross x %, limited by the cap; VAT is on the part billed.
- Releases need a certificate for the trigger, two approvers, then a release invoice with VAT.
- Diary the 12-month sign-off point; the FTA guide can bring the supply date forward.
Advance payments and how they are recovered
- Advance VAT is 5/105 of the gross on the day of receipt.
- Recovery is advance % of gross (or of gross less retention), limited by the balance.
- The last bill recovers exactly what is left.
Variation orders, delay damages and deductions
- A VO is exposure until the client approves it.
- Delay damages = (days late - EOT) x rate x contract value, up to the cap.
- VAT on deductions depends on whether there is a tax invoice or a price reduction.
The final account, UAE VAT points and receivables
- The final bill is the remaining 100% with exact advance recovery.
- Construction is 5%; invoice within 14 days of supply; no domestic reverse charge for construction.
- Read receivables and retention separately.
The contract terms that drive every bill: key table
| Term | What it controls |
|---|---|
| Advance % | How much of each bill recovers the advance, and the size of the expected advance |
| Advance recovery basis | Whether recovery is a percent of the certified gross, or of the gross after retention |
| Retention % | The share of each certified gross the client withholds |
| Retention cap % of contract | The most retention that can ever be held, as a share of the contract value |
| Release at practical completion % | The share of retention held that can be claimed at practical completion (the default is 50%) |
| Defects liability months | How long after completion the rest of the retention stays held |
| Delay damages % per day and cap % | Daily rate and the ceiling of liquidated damages |
| Payment terms (days) | Due date of a bill = invoice date + days; drives receivables ageing |
| Revenue method | A on billing, B percent of completion, C straight line, D point in time (module 5) |
From progress bill to tax invoice: key table
| Line | Bill 1 | Bill 2 |
|---|---|---|
| Certified gross | 300,000 | 320,000 |
| Retention withheld (10%) | 30,000 | 32,000 |
| Taxable (gross less retention) | 270,000 | 288,000 |
| VAT 5% | 13,500 | 14,400 |
| Tax invoice total | 283,500 | 302,400 |
| Advance recovered (net) | 30,000 | 32,000 |
| Advance VAT reversed | 1,500 | 1,600 |
| Net receivable | 252,000 | 268,800 |
Advance payments and how they are recovered: key table
| Basis | Calculation on bill 1 | Recovery |
|---|---|---|
| Gross (default) | 10% x 300,000 | 30,000 |
| Net of retention | 10% x (300,000 - 30,000) | 27,000 |
Variation orders, delay damages and deductions: key table
| Deduction | VAT |
|---|---|
| Delay damages, outside the scope of VAT (the default) | None |
| Delay damages treated as a price reduction | Treated as a reduction of the price; confirm with your accountant |
| Deduction supported by the client's tax invoice | Type its VAT and the invoice reference |