Accelerated VAT

According to the announcement, the UAE will impose VAT at a rate of five percent on the sale of goods and on services as from 1 January 2018. The five percent rate has been agreed between all GCC countries, and the framework agreement on the implementation of VAT is expected for release in July this year. The implementation will take place throughout the GCC, however the other GCC countries have from 1 January 2018 until 1 January 2019 to also implement VAT. The amount generated from VAT revenue in the UAE is expected to be between AED 8 and AED 12 billion in the first year.

 

Preparing for VAT (“VAT-readiness”)

In order to deal with the challenges, businesses in the UAE should evaluate and review their daily business activities, with a focus on the following points.

Understanding: Conduct analysis of all operational processes and business domains in order to determine all areas that will be affected.

Preparation: Elaborate future implementation strategy, prepare a checklist.

IT Systems: Make sure your IT systems are VAT enabled, including enterprise resource planning (ERP), accounting and point-of-sales IT systems. The IT systems must be able for complete implementation of all legal regulations in order to comply with VAT requirements in daily business.

Current accounting: Keep your books in order and make sure they are up to date by 1 January 2018, ready for the change as the time of supply is critical to your VAT liability.

VAT accounting: Ensure you have all the correct accounts and VAT codes set up to accommodate the calculation of your responsibility to generate a VAT return, which will need to be submitted periodically.

VAT return: Make sure your incoming and outgoing invoices are VAT compliant, on both the supply and sales fronts.

VAT guide: Prepare a policy manual for the business, to cover the company’s policy regarding VAT.

Contracts: Put resources in place to provide for VAT should any contract or project span into January 2018.

 

 

Implications on IT Support of Companies

Businesses and merchants will need to incorporate VAT into their existing accounting systems and will need to establish new processes to keep accurate records to demonstrate to the tax authority that they have correctly applied the VAT rules.

IT systems will form an important part of this process as in any organizations, a fully automated tax engine will be a necessity.

  • Business with existing ERP will have to add VAT module to it.
  • Business without any ERP system but with accounting processes who anticipate low growth will have to add VAT process to it.
  • Business without any ERP system but with accounting processes who anticipate steady and rapid growth will have to consider implementing ERP at the same time and along with VAT introduction to ensure the cost effectiveness.

 

How Accely can make your transition to VAT easy

VAT rules can be complex and the implications are not always considered. Implementation of VAT needs careful planning for its success.
Our dedicated VAT team will help you consider every stage of the implementation process.

Our experienced VAT team, along with international VAT experts and the Accelerated VAT approach have been advising and implementing strategies to help organizations comply with their VAT obligations and reduce VAT liabilities and particularly for clients without full VAT recovery.

Further information

If you require further information on VAT issues, please contact us.