VAT was introduced across the UAE on 1st January 2018 as an indirect tax. Value-added tax (VAT) is a consumption tax placed on a product whenever value is added at each stage of the supply chain, from production to the point of sale. A Standard rate of 5% is levied on the supply of goods and services in UAE. However, there are certain supplies such as local passenger transportation, specified financial services, healthcare, exports outside GCC and so on, which is either zero-rated or exempted from VAT in UAE.
Every Businesses in UAE who fell under the legislation had to take necessary steps for VAT implementation in UAE into their operations. The procedure for a successful VAT Implementation involves the following steps:
Preparing a VAT IMPLEMENTATION Project Plan within the organization requires proper co-ordination with different departments of the organization as well as external resources. It affects all transactions and touches many departments such as Finance, IT, HR and legal. It also warrants customization / changes to the ERP to adapt to the legislative requirements.
A complete impact assessment to understand and analyze VAT, its commercial impact on business, plan and execution of strategies to handle the impact. This is a key step that draws the foundation for implementation. The assessment is done at the operational, organizational and financial levels to re-design and implement correct control process, effective reporting and efficient governance. Assessing your Systems to ensure it is VAT Complaint, its eligibility to add/modify the tax settings, configure tax codes and tax calculations etc. The Current system must be VAT Compliant and allow easy management and tracking of records and a quick, simple and automated way of generating the accurate data for your periodic VAT declarations. On the other hand, if you rely on manual or disparate systems that generate error-prone spreadsheets, it will be much harder to report on VAT and demonstrate compliance thus leaving your organization to the risk of stiff penalties. A Proper ERP system that are VAT complaint is the need of the hour and for business to successfully run its show.
Mapping the transactions footprint to understand the VAT obligations across the business and organizing the training for the employees as well as the Managers. A Proper road map outlining the changes required at different levels within the organization and should form the basis for making changes to across different verticals in the organization including Finance, IT, Operations and HR.
As part of VAT implementation, to comply with the law of the land with respect to VAT (UAE VAT Law), we advise regarding the procedural formalities and the date by which registration has to be made, considering whether the company got any exemption in this respect or not, whether the group registration or standalone is more apt etc.
The Next important step is to register for VAT and test your business for VAT COMPLIANCE, conducting the historical and futuristic test of turnovers to ascertain the date by which VAT registration is to be applied or whether any exception to Registration is applicable. If there are more than one company whether Group Registration can be done.
In order to ensure that all taxable transactions are within UAE VAT compliance , its adherence in relation to timely reporting, document and process control, responsible shall be assigned to the head of finance who will be accountable for VAT Implementation and reporting and will be designated as VAT Team Leader or Implementation Head.
The installed accounting systems needs to be scrutinized and verified with Proper classification / Grouping with appropriate chart of accounts suitable for VAT regime will be suggested. The accounts team will then be given the proper guidelines to prepare the first VAT return to the Federal Tax Authority (FTA).
The Issuance of TAX Invoices as per the UAE Laws covering all the relevant information, will be implemented. The Invoicing team, IT team and any other department involved in the sales process shall be given Proper guidance.
IT plays a Vital role to comply with the UAE TAX Legislation and design documents accordingly. In order to incorporate the changes in the billing, accounting and other administrative procedures, the necessary training or information required will be communicated to the IT team/software personnel directly or through Project Manager responsible for Implementation.
The proper guideline and/or supervision for preparing and filing of the first VAT return taking into account all the output tax collected on the taxable supplies made and all the input tax paid on taxable purchse for the corresponding period and activities. The input tax credit shall be taken against the total VAT liability within the guidance on planning/better timing of cash flows.
Black Stone Tax Consultancy is specialized in VAT Implementation in UAE. We advise and assist the client by providing proper training on the impact of VAT on their business. We provide complete VAT implementation services around the Emirates.
