U.A.E. VAT registration – from October 2017

February 14th, 2017 by Stephen Jones Leave a reply »

Business in the UAE will be able to register online for value-added tax (VAT) from October.
On Sunday, Younis Al Khouri, under-secretary, Ministry of Finance, said the six-nation Gulf Cooperation Council is aiming to introduce a 5 percent VAT from January 2018.

In an update on its website, the ministry said that registration for VAT is “expected to be made available to businesses that meet the requirements criteria three months before the launch of VAT” with companies able to register online.

With regards to filing of VAT returns, the ministry said registered businesses will be expected to submit VAT returns on a regular basis online, with the default period for filing VAT returns at three months for the majority of businesses.

Businesses will be required to keep records that will allow authorities to identify the details of the business activities and to review relevant transactions. Specifics regarding the documents required, reports to be submitted, and the time period for retaining records haven’t been revealed.

Once the, UAE VAT law is finalised, and approved it will be published.

Now is a good time to review the possible impacts on your business for example on: cash flows, margins, pricing, contractual terms etc. Contractual terms may need careful review both for your customers and your suppliers. A tax on profits should not be affected by contractual terms but not everyone will want to see it that way.

This change will impact some verticals much more than others. There is often an initial drop in sales. It may also create opportunity for pre-VAT sales, or to reconsider the mix of products and services offered.

Asked whether some sectors in the UAE might be exempt from the tax to reduce the drag on the economy, Al Khouri said the government was aiming for a 5 per cent rate across the board but parts of seven sectors – education, healthcare, renewable energy, water, space, transport and technology – might get special treatment.

For other industries re-investment of the tax revenue by government may significantly boost new projects -as much as $20bn is estimated as the tax take..

It is prudent to review your financial systems, and whether those need upgrade, additional configuration, report modification (e.g. Invoices, POs), whether interfaces are likely to be affected, whether staff need retraining, whether new reports are needed.

If as expected this happens in January then that is also a time when many companies are either busy with a financial year end, financial audit, or software go live. For the same reason its also a time when consultants are busy. National and seasonal holidays also eat into management time.

The window – if VAT is introduced as intended on 1, January 2018 – is indeed short and demands that businesses urgently take action. raise awareness within the organisation. Carefully review supply chains and internal processes to fully understand the impact of VAT on the overall business model. Determine what needs to be done to be fully compliant with the new system.

Clear communication within organisations is critical, all employees need be aware of how the business model might have to change. All functions across the business – including finance, legal, IT and sales but also marketing and human resources – must understand the impact of VAT, including additional costs – which could be actual or related to compliance or cash flow – on their operations. It is critical to evaluate contracts that go beyond January 2018 regarding the ramifications of VAT – and who pays.

Compliance requires maintaining appropriate books of account to support VAT refunds and to avoid penalties for non-compliance.
– Accounting systems must be able to identify and record VAT – payable and receivable – across the entire supply chain.
– Businesses must be able to identify andto record rebates, exemptions or other special VAT treatments on particular transactions.

Start preparations early. Put some contingency budget away for consulting resources.
Paying VAT is one challenge, being fined for not doing it on time is a problem best avoided.

Summary:
Assess capability of existing systems
• Identify VAT implementation strategy
• Identify contracts that need a VAT action
• Identify intercompany transactions
• Undertake training / awareness

VAT implementation will have immediate effects on consumer behavior, which gives both challenges and
opportunities for companies to assess their business direction and to review their: strategies, budgets, cash flow forecasts, manning.

If you need to implement a new financial system, or to enable VAT in your current systems then contact us on 00091713365589

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