How Companies Can Get Ready for VAT

The VAT regime in the region will have a significant impact on business and profitability. Companies dealing with taxable goods and services need to understand and prepare for the consequences. Similarly, companies that import zero-rate goods should also needs understanding, taking into account the effects of VAT or being charged.

There is a single VAT agreement on the GCC, each Member State has the right to adopt its own laws within the general framework. These different treatments need to be understood.

VAT affects companies in the following areas:

  • Price and profitability of the product
  • Cash flow financing for payment and repayment differences
  • Transaction and reporting systems
  • contracts related to sales and acquisitions
  • Training in organization

A very preliminary matter is to mention the clause – taxes, where applicable – in all tenders and contract negotiations. In fact, companies should review long-term contracts and negotiate with customers to change conditions and include taxes.

Get ready:

  • Invoices with taxes
  • Return the presentation
  • keep records

Invoicing with Tax

So far, most companies did not consider separately, for the tax and therefore the billing was pretty easy. The introduction of VAT requires the post-accounting process as well as the tax accounting modules in the existing software. Companies also need to register the supplier’s invoices and their VAT registration number.

An accounting system consists of

  • Masters
  • Transactions
  • Regulations
  • Configuration

The impact of VAT on each of these modules must be determined by the IT team and discussion with suppliers to make changes.

Returns Filing

The accounting system must automate the calculation and reporting of taxable transactions. Most likely, each country has a portal to submit reports electronically using predefined formats. Computer systems need to be modified to prepare digital files for download on government portals.

Maintaining Records

The law sets the retention period for records and these records must be retained for all transactions, including changes to master data. The computer system will also take into account the case of refunds and claims that occurred in the future in the audit.

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