By Julia | November 13th, 2017 | VAT
The Value Added Tax or VAT is largely based on consumption tax evaluated on the value added to services and products. It is applicable for almost all the products and services purchased and sold for consumption within a particular country where it is implemented. Hence, products which are exported or services which are sold to consumers abroad are not subject to VAT. In the gulf region, Gulf Cooperation Council (GCC) has recently allowed the inclusion of VAT system stating that the authority will charge VAT at a rate of 5% on the sale of products and services effective from January 1, 2018.
This system also mentions the products to be exempted from VAT. The GCC countries have unanimously concurred that 100 food items should be exempted from the tax and also decided on zero rate for several industries like social services, education, and healthcare.
Barring a handful of exceptions, for which particular arrangements are in order, every other product and service will adopt the new tax, which will reflect across all industry sectors.
At this point, however, it is unclear which VAT model will be applied in the UAE and if all other GCC countries will opt for the same model.
Measures for VAT implementation
To counter the challenges, organizations in the GCC should analyze and review their business activities while taking the below-mentioned steps.
Acquire an understanding of all the operational procedures and business engagements to identify all the spheres that will have an impact.
Develop a plan for implementation and make a checklist.
Keep your transactions cleared, books organized and ensure they are updated on a regular basis by January 1, 2018, since the period of supply is crucial to your VAT liability.
You need to have all the correct and updated accounts and VAT codes maintained to fit in the calculation of your liability to yield a tax return which you need to submit intermittently.
Ensure your outgoing and incoming invoices are VAT-supported, on both the areas of supply and sales.
See to it that the IT systems are VAT-enabled, including accounting and point-of-sales systems, enterprise resource planning (ERP). The IT systems should be capable of finishing the implementation of all legal proceedings to support the tax requirements in the business.
See whether your staff knows about VAT or not and whether they update job descriptions to represent their VAT responsibilities.
Recruit an appropriate individual for the profile of public officer upholding the organization in front of the VAT authorities and make sure the person is capable and fit for the role.
Make a policy handbook for the business to elucidate the company’s policy concerned with VAT.
Prepare necessary resources to provide for VAT, if any project or contract extends until January 2018.
As a generic rule all across the world, the guidelines of self-evaluation, declaration and payment are expected to be adopted in GCC. Organizations, as registered VAT vendors, shall be liable for the amount of tax payable and make a payment between the gap of three months during a fiscal year. These evaluations will subject to regular audit by the tax authorities.
It is believed that the responsibilities of organizational management will invite several liabilities, and the outcome of errors, non-cooperation, and omissions will be troublesome for the company’s managers.
Considering the consequences mentioned above of non-compliance, the accurate and cohesive implementation of the VAT system and its execution on a daily basis is crucial for the management of the business to avert future errors and sanctions.
Following implementation, VAT will impact every aspect within a business and will be imposed on products and services at every step of the supply chain with the ultimate burden on the consumer, at least in theory. If not adopted accurately, the new tax may produce an extra expenditure to the business, and non-cooperation with the tax law will result in severe penalties.
Thus, all businesses must assess and review their present condition regarding their consumers and suppliers and if the latter is registered or not. The prompt training of employees who will handle the tax issues is just as integral to making sure that all frameworks of the organization allow VAT administration.
It is suggested for all businesses to begin the evaluation and preparation procedure on time to assess their company’s standing and adopt the necessary changes.
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With the recent development in VAT system in the Gulf region, the organizations are looking at a quantum shift from how they function. In this case, uaevatexpert is equipped with the right knowledge and expertise to provide services that will ensure your business’ credibility stays at the top, even with the challenges that the new regulations may impose, thus, making the process of revenue generation, as seamless as it can be.
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