What is VAT?
Value Added Tax (or VAT) is an indirect tax. In a country which has a VAT, it is imposed on most supplies of goods and services that are bought and sold.
The VAT is charged at each step of the ‘supply chain’. Ultimate consumers generally bear the VAT cost while Businesses collect and account for the tax, in a way acting as a tax collector on behalf of the government. A business pays the government the tax that it collects from the customers while it may also receive a refund from the government on the tax that it has paid to its suppliers. The net result is that tax receipts to the government reflect the ‘value add’ throughout the supply chain.
As of 2019, three of the GCC Countries adopted VAT, namely Saudi Arabia, UAE, and Bahrain. The implementation of a VAT had an impact on all the segments of the GCC economies and entails a fundamental change in the way consumption taxes are enforced in the region.
Why Choose BMS?
We understand how important a successful VAT implementation to your business. By staying abreast of developments and the frequently changing rules, at BMS Auditing, we ensure that you have a clear and full understanding, enabling you to be updated and compliant in every aspect.
BMS have professional qualified Chartered Accountant/VAT experts who successfully implemented VAT in UAE and KSA regions for more than a hundred prestigious companies. At BMS, we are always ready to help you to be VAT ready.
The following are some of the frequently asked questions regarding VAT compliance:
Is it necessary that my business operations require registration under VAT?
For this assessment, you need to go through the two types of registration – Mandatory and Voluntary. The kind of registration can be checked as below, based on your annual invoicing:
a.)Mandatory Registration– Invoicing More than mandatory threshold If your past 12-month invoicing or within next 30 days is/ will be more than the mandatory threshold
b.) Voluntary Registration– Invoicing more than voluntary threshold If your past 12-month invoicing or within next 30 days is / will be more than the voluntary threshold
Do I have to register separately for many businesses?
Every business is required to be registered as per the mandatory threshold limit under VAT Law. However, generally, VAT law endow with an alternative to a group of businesses under the same Management to register as one tax group (subject to certain conditions). If you register as one tax group, then all the businesses under the same group will form part of consolidated compliance and regulatory reporting under VAT law.
Do I need to charge VAT for the goods/services I supply?
In general, almost all the supplies of goods and services are subject to VAT. However certain goods/services are specifically exempted by the VAT law. In other words, if your goods/services are not under the exempt category, then these will be subject to VAT (either at the standard rate or at zero rates).
What are the consequences if I do not register or comply with VAT laws?
Definitely, there will be some penalties that can be forced on business owner for non- compliance even from the very first day of implementation of VAT. As a business owner/manager, you be supposed to be VAT compliant from day 1, provided the present level of business is above the mandatory threshold limit.
Is it necessary to modify my accounting application/software system for VAT compliance?
The accounting software may not require to be changed, however, it would require modification to ensure that the system is competent to function as per VAT law. The major areas of system amendments will be:
a.) VAT compliant Invoicing / Credit notes.
b.) Correct documentation of VAT input recoverable and VAT output payables & Reverse Charge Tax Accounting.
c.) Supplier and Customer master data adjustments.
d.) Computerized functionality for report generation for net VAT payable (Output VAT – Input VAT).
e.) Product/Service master modification to record the rate of tax to be charged based on goods/services categories.
What is the period of VAT return filing – Monthly or Quarterly and how it will be paid?
The due VAT amount is required to be paid on a monthly/quarterly basis (as the case may be), which is based on the business turnover. Most likely, the payment of VAT will be online and the payment details have to be mentioned in VAT return as well.
What documents do I have to keep?
As per VAT law, the business wants to keep all the records i.e. purchase and sales invoices, debit/credit notes, VAT payment evidence, inventory records including quantitative particulars, Expenses, etc. in order to make available for the VAT officials for their verification, whenever it is requisite by them. These records should be kept in a proper manner for examination purposes.
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