VAT has been implemented in the UAE and KSA from January 1st 2018,as mandated by the GCC. 5% VAT will be implemented on the supply of goods and services. It is mandatory for businesses to maintain books of records for a minimum of 5 years henceforth. Read on to get answers to any questions you may have related to VAT.
Value Added Tax (VAT) is a general consumption tax which will be levied on the majority of transactions of goods and services. It is charged at every point of sale, from manufacturing to sale to an end consumer. The mechanism of input tax deduction ensures that the businesses act as tax agents or tax collectors on behalf of the government by collecting tax from the end consumers, account the collected amounts and pay the tax.
This is achieved by adjusting the tax paid on purchases referred to as ‘Input Tax Credit’ or ‘Input VAT’ with the VAT collected on sales referred to as 'Output VAT.'' If there is any balance liability after adjustment, the same needs to be paid to the government.
Ultimately, the entire tax is paid by the consumer. Refer our article How Does VAT System Work for more information.
Your books of accounts act as evidence for minimum annual turnover threshold limit for VAT registration. Based on this, either you will be mandated to register or you can request for exemption from registration.
Thereby, you must ensure that your books of accounts are updated with accurate information. Start recording all your financial transactions in a VAT compliant way. Choose a VAT software which will make your life easy.
If your business is registered under VAT, you will start charging VAT on sales or supply of taxable goods and services. You must account the VAT paid such that you can claim the input tax credit. Finally, you have to file your VAT return online on a regular basis, disclosing the details of VAT that was charged and paid. Since you can avail the benefit of input tax credit only after filing your VAT return, there will be some interim cash blockage.
Your VAT software must help you generate VAT return in a correct manner and help you understand how VAT is calculated. If you are in the UAE, the VAT software must also have the capability to generate Audit File.
Ensure that your VAT software adapts to the unique needs of your business and takes care of VAT compliance. Educate your teams on VAT and its impact on business.
Review your business processes, practices and procedures with respect to pricing, procurement, invoicing, logistics, etc. and align them to VAT. Inform your vendors and customers about VAT and its impact on transactions.
Tally is an accredited, VAT-ready software. It is packed with rich capabilities to help transition your business to VAT with ease, and without disrupting your routine activities.
Tally is built in close proximity with the day-to-day activities of customers and tax professionals. The product is backed with over 30 years of expertise in building software for VAT in different tax environments.
You can start creating various types of VAT compliant invoices within minutes of installation. Record transactions related to a range of business scenarios such as discounts, freight charges, self-account for reverse charges, input tax credit and advance receipts. You can print VAT compliant tax invoices in Arabic, English or both with Tally.
What if you have entered a wrong TRN no. or typed in a wrong transaction detail? Our VAT software features also include the unique capability to detect errors. It alerts and lets you correct the error by indicating what might be wrong. You can be sure that your business data is VAT compliant, up-to-date and ready for audits anytime.
Before generating your VAT return, you can see a detailed analysis of all transactions and VAT calculations. If you are in the UAE, you can generate your VAT return in XML or MS Excel format and VAT Audit file in ASCII format as prescribed by the FTA. The return gets generated by breaking down the taxable sales transaction Emirate-wise.
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