VAT Implementation is undoubtedly the most vital step in the economic sector of UAE, which is going to have a huge impact on the purchasing power and overall cost of living. VAT is one of the most common types of consumption tax that has been implemented in more than 150 countries across the globe and UAE is the recent addition to the list.
Businesses will have to carefully document their income, costs and VAT charges associated with it. Configuration of the IT system as per the VAT regulations needs to be completed by the entity for smooth handling of tax booking, invoice generation, return filing etc.
UAE had implemented VAT laws and regulations with effect from January 1, 2018, along with Kingdom of Saudi Arabia. The businesses registered under UAE VAT will be levied 5 percent tax.
Equipping your business for VAT
- Plan Your Strategy:
Decide on a VAT implementation strategy. Explore the options of outsourcing the implementation process or managing it in-house.
- Build a Team:
Appoint a team that is well aware of the VAT scenario in the region and fully equipped with the knowledge to successfully implement the required processes
- Learn VAT Applications:
Understand VAT treatment on every commercial activity of the business
Absorb Information: Understand how VAT impacts business functions and processes in case of revenue, cost and working capital.
- Assess current capabilities:
Assess your current ERP system. Generate awareness amongst existing staff and provide trainings if necessary.
VAT implementing plans and approach
VAT implementing plans and approach comprises of:
- Evaluating and mapping the business transaction: Business transactions need to be accurately assessed for a hassle-free implementation.
- Identifying implications based on the current business model: To build the most suitable VAT implementation plan for your business, an important step would be to recognize the implications based on the present model.
- VAT readiness assessment: Companies will have to assess the VAT readiness of their technology platforms and tools, whether they are capable enough to incorporate the new implementation.
- Issuing a VAT blueprint: Designing a blueprint outlining the implementation of VAT on your business model, keeping into account the various ways it is going to affect your trade, is mandatory.
- Configuration of the IT systems, process and people: The IT systems should be configured according to the VAT regulations, along with providing guidance to core VAT team members in the client organization about the implementation of VAT in the UAE, business type and compliance challenges on the UAE VAT Law.
- Identifying resource requirement for VAT which will enable the entity a smooth migration to VAT regime.
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