As a member of Gulf Cooperation Council (GCC), UAE is set to implement Value Added Tax (VAT) from 1 January 2018. It has been agreed that the remaining GCC countries would implement VAT by late January 2019.
Accountants have a very critical role to play in the transition to VAT and to ensure continuous compliance for their clients.
Implementation of VAT in UAE is similar to GST implementation in India. Opportunities in Financial & Accounting services are available during the pre-VAT and post-VAT period. This is a very good outsourcing opportunity for accounting practices in India. Accountants in India are now getting trained and experienced in GST accounting. Their expertise will be of immense value in UAE accounts with the new tax regime.
Industries and businesses in UAE did not have to pay taxes so far. Since this is a new concept, they may prefer to obtain the support of professionals to avoid non-compliance issues.
To be ready for VAT regime, clients would need expert support to ensure the following:
- Smooth continuation of business post 1 January 2018
- Safeguard profit margins by amending contracts before VAT implementation
- Configure accounting software systems to be compliant with the new law
- Avail of the input tax as available
Some of the key services that accountants can provide are:
- Understanding and knowledge transfer of the UAE VAT Laws to Businesses
- Understanding Taxpayer Business and mapping relevant provisions of the Act especially Exemptions, Return Filings, and Refund claim related procedures
- Advise in System Master Configuration
- Creation/reclassification / re-grouping of Chart of accounts in ERP
- Creation of Masters & Templates for capturing data including developing Standard Operating Procedures (SOP)
- Creation, validation & enabling capturing of data for Goods / Services; Place of Supply; Taxable & Exempt
- Identifying & reporting additional transactions which fall within the meaning of Supply as per VAT laws and understanding inter-unit and inter-company Stock Transfers, etc.
- Creation and design of various types of Reports relating to purchases, sales, and VAT
- Migration Services
- Migration from one accounting platform to a better one for better compliances
- Transition from existing to new Systems
- Data migration audit
- Application system testing for the new System
- Business process definitions in the new System
- Other Services
- Configuring systems as per VAT requirements
- MIS for VAT for ensuring pro-active compliance
- Facilitating auto-reconciliations, data integration between Head office and branches
- Automation of filing of Returns
- Services of VAT compliance and related accounting & compliance service
- Training services & retainer for periodical query resolution
- Interpretation and implementation of the law as applicable, eligibility for input credit, etc.
- Pricing of products/services for ensuring prices are competitive
- Helping the taxpayers in resolving tax-related issues
- Act as a mediator and help the taxpayers in registration, payment, submission of returns, etc.
- Facilitate filing of Returns and ensuring matching of appropriate tax credits
- Reconciliation of books with VAT transactions
- For testing of application software including ERP configurations
- At pre-implementation, implementation, and post-implementation stage including re-modeling business structure
- Testing of application software at different stages such as pre-implementation implementation and post-implementation
- VAT Audit on annual basis or as part of internal audit
The strength of a VAT accounting practice is highly dependent on
- Knowledge of VAT within the finance, tax and law departments
- Business considerations
- Processes adopted before implementation and followed after implementation
- Capacity of technology systems engaged
- Attention is given to other important considerations
- Security systems installed
Accountants should be able to consider all functions of a business, such as the following, in the adoption of the new tax regime.
Operations: Pricing conundrum, product design, business model, contracts and other business documents, customer & vendor renegotiation and training
Compliance: Invoice compliance management (issuance and verification), VAT filing compliance management, internal control management, policies, guidelines, manuals, group VAT registration
Technology: Business operating systems, accounting system, related interfaces, internal control system, tax management system
Finance: Revenue, costing, cash flow, forecast/budgeting, accounting, reporting & intro GCC transactions
Accountants should be able to advise best methods to be used for tax implementation and its adoption. Appropriate procedures and project management of the implementation are important. This should be done in consultation with the client and in a phase-wise manner.
1. Project management: Project setup, VAT impact study
2. VAT technical: Mapping of transactions, identify compliance requirements
3. Business processes: Review business functions, communication plan
4. Technology: Review system changes, review software changes
5. People & Organization: VAT awareness training, implementation plan
Mobilization / VAT readiness assessment
1. Review legislation
2. VAT decision flag
3. Business impact modeling
4. VAT process design
5. IT design
6. VAT compliance function
1. IT testing
2. User training
3. VAT manual and procedures
Outcome: Re-configured systems, process, and people
2. Review if it’s working
3. Post-filing VAT Return review
4. VAT compliance
5. Ongoing processes, operations, and compliance monitoring
6. Audit support and voluntary disclosures
7. Engagement with Free Tax Authorities
8. Record keeping
9. VAT audit
Outcome: Ongoing compliance and continuous improvement
An experienced and trained accountant who has the thirst to learn and the patience to understand and implement VAT in GCC could make use of this opening to expand the business or start a self-employment practice. This is the right time to start so you can avail of pre-VAT opportunity also. VAT accounting for UAE business will be a good beginning and a learning process to enable you to expand more efficiently and confidently to other GCC countries when they implement VAT.
Pearl Accountants are proactively working with the object of supporting ease of doing business in India and helping start-ups easily set up business.
Please contact us for any support and guidance for GST/VAT training and self-employed GST/VAT accounting practice.
Call: +91 989 521 2229