VAT how GCC businesses see it VAT is a concern for a majority of companies Source: Deloitte: Preparing for VAT in GCC ERP (Programming) System to account for VAT is understood as the main area of concern. More than 50% of companies are setting aside more than US$ 25K for getting a VAT enabled system or getting VAT enabled in their current business accounting system
What is VAT? Value Added Tax Tax on consumption of goods & services Also known as Goods & Services Tax (GST) in many countries (Malaysia, India, Pakistan etc.) Borne by the FINAL CONSUMER Should NOT be the cost of doing business * Collected incrementally at each stage in the value addition/ production by the business on behalf of the government Risks/Concerns: Regulatory e.g. Penalties & Compliances, Mandatory Acct records Finance e.g. Un-availed Input Tax Credit goes out of the bottom line Market e.g. VAT Compliant Sales Invoice
UAE VAT Introduction & Implementation considerations Introduction & Current Status Expected to be implemented w.e.f 1 Jan 2018 VAT Framework is ratified by the member states Underlying framework is final and now member states are issuing the VAT legislation The expected rate most probably will be 5%. Few exemptions i.e. Financial services and health care being exempt. Countries will issue specific exemptions also like UAE is considering Real Estate first sale to be exempted. Exports will attract Zero rated VAT Reverse Charge for purchases done outside GCC Federal Law No. 7 of 2017 of Tax Procedures & role of Federal Tax Authority Tax Registration Number Penalties upto 5 times Refunds 20 days for appeal
Type of supplies Simple example Sales 5% Charge on Sales VAT recovered on the purchase Net VAT Payable Garment Manufacturer Garment Wholesaler Garment Retailer 1,000 50 0 50 1,500 75 50 25 2,000 100 75 25 TOTAL VAT PAID BY END CUSTOMER 100
Type of supplies Other Examples Standard Tax VAT Charged VAT Credit Available VAT @ zero No VAT Charged VAT Credit Available Reverse Charge Purchases from Outside GCC VAT Exempt No VAT Charged No VAT Credit Available Group Tax Transfer pricing
Type of supplies Other Examples INPUT SIDE OUTPUT SIDE Local Purchases 100 5% Paid on Invoice Import of Services 200 5% Paid on self declaration GCC COMPANY 5% Collected on Sales Invoice Local Sales 800 Import of Goods 300 5% Paid at Customs point 0% Collected on Sales Invoice Export Sales 100
Compliance Environment Each country will bring out detailed legislation Self Assessment Mandatory registration - Turnover Filing of the periodic VAT return to government - online VAT is payable by a certain cutoff date Record Keeping in a VAT environment - Tax Invoice - 5 10 years of record keeping - Debit or credit notes - VAT Exempt supplies and Zero rated supplies Penalties for non-compliance/delays
Compliance Environment for YOU Compliance environment for the target audience
Impact Assessment Design & Implement Operate GCC VAT Introduction & Implementation considerations Implementation considerations for YOU Project & Organization set up High Level Impact on transactions Roles & responsibilities Training & communication plan IT Systems requirements Reporting requirements Impact on cashflow & mitigation Implementation Plan Study Legislation Transaction mapping with rates Roles & responsibilities Implement IT Systems or make modifications Reporting Registration Test & review of first return and Payment of VAT Conclude 2 2 weeks 4 10 weeks 2 2 weeks
Impact on transactions & business processes Sales Order Approved Delivery Sales Invoice VAT code is Auto selected Receivable General Ledger & New VAT Account ERP VAT Return Obviously Purchase is a mirror of this process
Impact on transactions & business processes Purchase Order Approved Delivery Vendor Invoice Payable General Ledger & New VAT Account VAT code is Auto selected ERP VAT Return Lets see how Sage can help..
Recent Releases Launching Today 2017.0 August 2016 2017.1 December 2017 2017.2 April 2017 2018.0 August 2017 Sage CRM 2017 R1 Sage CRM 2017 R2 Sage CRM 2017 R3 Target date of VAT compliance module for Sage 300 Oct 2017 * Customer Workshops for VAT Nov 2017