Getting Ready for VAT in the UAE!
The UAE VAT Laws and related Implementing Regulations are expected to be issued very soon that will be the primary source of information and guidance for VAT in the UAE.
Until then, the following are some action points which you may wish to consider now to help smooth the implementation process once the national VAT law is released:
- Review the current accounting system to ensure it can comply with the additional tracking of taxable versus non-taxable supplies, payments, and credits under the VAT regime, including a geographic breakdown of income on an Emirate-by-Emirate basis.
- Ensure that invoices charged to customers are able to clearly indicate the amount of VAT on taxable supplies and that new contracts with customers include a suitable reference to the inclusion of VAT if within scope.
- Adjustment to the chart of accounts, ERP, and accounting policies to automate as much as possible the computation, monitoring, and payment of VAT.
- Mapping of transactions and generation of defined codes to determine the rates of tax, whether standard or exempt, place of supply, and cash flow forecasts.
- Staff awareness training is recommended so they can be informed to explain the basic features of VAT to customers. Further training should be provided to accounting and finance departments to ensure daily transactions are accurately recorded and documented.
- Identification of possible group registration for ongoing VAT returns.
- Maintenance and compliance with record retention policies, including proper archiving controls.
- Review current inventory management procedures to ensure it is optimal based on expected liquidity needs given that input VAT (5% on purchases) may remain tied up in inventory until sold.
- Monitor cash flow carefully, as output VAT invoiced to customers that is uncollected at the time the VAT return is due will still need to be paid to the FTA. Consider in the overall strategy how this may impact current cash flow. This impact is exacerbated for businesses that grant sales on credit while purchases may be due in advance or on tighter credit terms.
How we can help? The goal for all businesses is to be compliant with the VAT Law, while minimizing any potential disruptions.
Our team draws its expertise from almost 40 years of local experience in the UAE and in conjunction with our global BKR International member firms, many of which are based in established VAT jurisdictions, we are able to provide comprehensive tax services from planning and implementation tax advisory to ongoing reporting, compliance, and filing of returns
Disclaimer on Use
The information presented is intended for general information only and is not meant to be a substitute for professional advice or to be used for decision-making.
Professional advice relies on an assessment and understanding of the specific situation for each person and, therefore, the application of changing laws and regulations in the UAE, will vary widely from case to case.
The information contained herein is based on facts available from sources we believe to be credible at the time of publication and is subject to change.