UAE will introduce VAT on 1 January 2018 at a rate of 5%. VAT will be introduced in the UAE in two phases. In Phase 1, companies with recorded revenue of more than AED 3.75m are obliged to register for VAT. Also within Phase 1, companies with revenue between AED 1.87m and AED 3.75m will have the option to register for VAT. In Phase 2, all companies will have to register for VAT however the date for Phase 2 is still under discussion. This may indicate the manner in which other GCC countries will phase in VAT.
How BDO can help you now:
- Providing tailor-made innovative tax solutions and services. We have the experienced teams in Tax, Consulting and IT who work together in delivering a one stop solution to all of our clients’ needs.
- Sharing information, experiences and knowledge about the regulatory, economic and business environment.
- Adopting a flexible approach to working alongside clients, in getting business operations up and running in the dynamic and challenging environments in which the organisations operate.
- Serving on-going clients’ business requirements in the GCC and at international locations through our global teams working together seamlessly.
Working with VAT experts from across BDO internationally – the BDO Member Firms in the GCC will also host seminars and workshops to provide practical advice on the VAT implementation and its impact on our clients’ businesses.
BDO HAS ADVISED CLIENTS ON IMPLEMENTING INDIRECT TAXES IN A NUMBER OF COUNTRIES.
HERE ARE OUR KEY LEARNINGS:
It is critical to ensure the effective design of systems to capture and report indirect taxes for compliance purposes. There were many streams of transactions which fell within the scope of indirect taxes. The streams that need to be captured include petty cash through to import and export transactions. For compliance purposes, ensure that the report parameters and the data required are designed effectively with IT. This includes deemed supplies such as gifts, private use of business assets and free services to connected persons.
Not all suppliers were prepared for the implementation of indirect taxes and a basic level of education was required to be given by our clients to ensure that our clients were able to claim the input indirect taxes on purchases. It is worth engaging with your suppliers prior to 1 January 2018 to ensure that they are sufficiently prepared – a simple checklist can guide your finance team on how to ensure that invoices from suppliers comply with the indirect tax legislation.
We found that many organisations needed additional support during the initial period as existing team members did not have sufficient indirect tax experience.
For the service industry in particular we found that clients needed to tailor their HR systems for staff reimbursements to ensure indirect tax compliance.
For the retail and hospitality industry price tags, menus, websites and apps were redesigned and reprinted incorporating the indirect tax.
Our clients involved in e-Commerce and outsourced services required a significant amount of development work in terms of the design of portals and interfaces.
Many businesses started their indirect tax strategy very late (Malaysia announced the indirect tax implementation date about 18 months in advance). These businesses suffered penalties for late registration and further penalties for errors in compliance in the early months which could have been avoided.