VAT is implemented in UAE from 1st of January 2018 at the rate of 5%. It will be applied to all the supplies of goods and services. Businesses in UAE will surely face a number of challenges, as the new tax regime will impact all parts of the business.
The recent reports of Deloitte Middle East show that the implementation of VAT in UAE can require some important modifications to operate a business in UAE which includes:
To gain knowledge about the VAT implementation system and its impact on demand for goods and services.
Business enterprises must revise their Enterprise Resource Planning System (ERP) system so that they will be able to cope up with the charging and recovery of the VAT.
Record keeping, books and financial statement of business should always be maintained in a proper format.
Clearly, understanding the procedure of applying for VAT registration number and the VAT registration obligations.
Rectifying the business terms with customers. Businesses must clarify the terms with customers that VAT is an additional cost for them, not for the suppliers.
If in case, business enterprises are not using ERP system then they should implement manual VAT accounting system.
Business enterprises must ensure that business is organized in such a way which avoids unnecessary cash flow or transactions, absolute VAT costs arising, specifically on inter-company transactions.
Check Your VAT Knowledge UAE
- Check the accounts payable function evidence that VAT should be paid and recovered as quickly as possible.
- Check the accounts payable function should understand when VAT should be charged and when not.
- Changing invoice templates for making sure that new fields relevant for VAT accounting are included.
Companies in the UAE, whose annual income exceeds Dh375,000 must register under the GCC VAT system. The companies whose annual income falls between Dh187,000 and Dh375,000 will have an option to register for VAT during the introduction stage of VAT implementation.