VAT in UAE: What Business can do to Comply

The UAE and Saudi Arabia implemented VAT of 5% from January 1 2018 and goods and services of essential nature are exempted from it. Other GCC countries are to follow suit shortly to diversify their sources of revenues given the scenario of prices of oil and gas falling considerably and revenue from them is very limited. At this juncture, the most significant question is: Are you VAT ready? Most importantly, businesses should make their accounting system comply with VAT laws and thereby a smooth transition to VAT regime is possible. Businesses should assess the main aspects of their operations to comply with vat including:

Ø  Identify the products and services that fall under VAT

Ø  Formulate effective strategies for pricing and competition as VAT will bring about a new turn in the business operations

Ø  Identify how accounting and business systems will be impacted by VAT and adopt necessary measures to transform them to compliant with VAT.

Ø  Evaluate all the business relations to ensure VAT compliance. Make necessary adjustments in contracts to make them VAT compliant.

1.                  Get a clear idea about the taxed and non taxed items

The first step towards VAT compliance is to determine the products that are VAT taxable, zero rated and exempted from VAT and then you should check whether your products fall under which category. If you are a supplier of goods and services for export, real estate developers, airlines, education, medicines, hospitals are taxable but the rate is 0%. If you are a supplier of exempted items, you don’t require registering for VAT.

2.                  Set a strategy to transform whole business operation to be VAT compliant

The end consumer pays the VAT and thus consumer behavior is going to have an immediate effect on your business. It is necessary to restructure your pricing policy and improvement in the quality of products so that 5% VAT added to your goods and services will not distance your customers from your products. Companies can conduct survey and similar kinds of actions to identify customer opinions and make necessary adjustments as per requirements.

3.                  Transform all your internal systems VAT ready

These days all business runs with the help of automated software systems. The billing and invoicing are conducted by these automated systems. Hence, businesses should make sure that their system need to calculate VAT correctly and at the same time, identify exempted and zero rated items. VAT is not limited to accounting alone, marketing, human resources, information technology, procurement, and other departments also fall under it. Hence, there is a great need for businesses to transform all their internal systems VAT ready.

4.      Evaluate all business relations

Given the nature of VAT in UAE, along with internal systems, businesses are required to associate with suppliers to be fully comply with VAT. Invoices generated for them should be in line with VAT. Potential remedial measures should be taken to evaluate the additional cost impacts in your transactions with them.

Businesses should consider VAT seriously. Non compliance will result in penalties. Ignorance of the law will not be an excuse. Therefore, every business should opt for GCC VAT PRO accounting software as a bold step for business to comply w