/** * The main template file * * This is the most generic template file in a WordPress theme * and one of the two required files for a theme (the other being style.css). * It is used to display a page when nothing more specific matches a query. * E.g., it puts together the home page when no home.php file exists. * * @link https://developer.wordpress.org/themes/basics/template-hierarchy/ * * @package WordPress * @subpackage Tally * @since 1.0.0 */ ?>
The United Arab Emirates (UAE) Cabinet has implemented a new reverse charge mechanism on electronic goods among registered businesses. This is applicable from October 30, 2023. With this blog, let’s understand the change and how to manage RCM on electronic devices using TallyPrime.
As per the latest amendment, if your business is selling electronic devices to a registered recipient in the UAE and the recipient intends to either resell such devices or use them to produce or manufacture electronic devices, then you will not be liable for calculating VAT in relation to the supply of electronic devices.
The recipient of electronic devices should calculate VAT based on a reverse charge mechanism. In simple words, the recipient should self-calculate the VAT and claim the eligible input tax credit on such purchases.
In order to apply the reverse charge mechanism, the following conditions must be met:
Before making any supplies, it is critical as a supplier to ascertain the buyer's VAT status and his intention to buy.
TallyPrime offers you a simple workaround to keep your business running without interruption until the necessary product adjustments are made to comply with the new requirement.
Let’s start with sales.
If you are selling electronic devices to VAT registered business who has provided a declaration that they intend to resell or consume it for further manufacturing devices.
In this case, you need to simply record a sales voucher without the Output tax. You can follow the below steps to record the sales voucher:
The above transaction will show as ‘Not Relevant for this Return’ in VAT return form 201. Also, note that there will be no change to sales made to unregistered business or end consumers.
If you are registered business purchasing electronic goods by providing the declaration discussed above, you need to calculate the VAT on RCM basis by recording a purchase voucher. Given the purchase is on RCM basis, the buyer needs to increase the VAT liability and subsequently claim the input tax credit by recording the journal voucher.
Alternatively, if you don't want to create a new purchase ledger, you can override the Nature of transaction for the default purchase ledger in the transaction and select Domestic Purchases - Designated Zone while recording purchase voucher.
Recording Journal voucher for booking VAT liability on purchase
In the VAT 201 report, you can view the transaction in Reverse Charge under Sales (Outwards) and under Local Purchases, you can view the transaction under Domestic Purchases - Designated Zone and the input tax credit claim under Reverse Charge
For more details, you may refer our step-by-step guide on Reverse Charge Mechanism on Electronic Devices in TallyPrime.
Tackling Tax Compliance with TallyPrime
Withholding Tax in Saudi Arabia
What Is Small Business Relief under UAE Corporate Tax?
Understanding UAE Corporate Tax Law for Natural Person Business
How to prepare for UAE corporate tax filing?
UAE Corporate Tax Update: Key Registration Dates You Need to Know