UAE will soon introduce a new taxation system in the form of VAT, confirmed by the Ministry of Finance, UAE. The nation, till now, does not have any enforced federal income tax regulation for general business but with the implementation of VAT with effect from January 1st, 2018, all goods and services would be charged at a standard rate of 5% exempting basic food items, health, and education.

In order to execute proper implementation of VAT, the businesses and their respective owners had to follow certain steps to ease up their filing process. Here are the brief procedural steps involved and business owners should follow these steps for implementing VAT in UAE.

STEP 1: Check Applicability of the Business

First and foremost, the business owners have to check whether their businesses even fall under the guidelines of VAT applicable business as in whether the company needs to be registered for VAT or not at first place. VAT is only applicable on businesses with an annual turnover of more than AED 375,000 and it does not have to fall under any of the exempted categories such as healthcare, education, local transport, residential real estate or any of the selected 100 essential items.

STEP 2: Tools and Essentials

The businesses need to have a latest authorized software to file the tax. The software should follow the new VAT modules underlined by the new tax law. The software could be either purchased or could be used as a subscription-based model. Digital filing of the taxes will ease up the process.

STEP 3: Talent and Workforce

The company needs to have a dedicated team for carrying the end to end work of tax filing. Though it does not require highly skilled talent still the companies had to make sure that their accounting team can handle all the challenges. Since filing is a digital process, the IT (Information System) Department has to work in accordance with the Accounts Departments to pace up the process

STEP 4: Examine the operational activity

Tax planning is a task that involves higher expertise and consultancy, hence it is always beneficial to get on-board a Tax expert in analyzing the operational activity of the company. The primary job of the Tax expert would range from segregating the businesses verticals and presenting the best possible supply chain of your company, intercompany transactions, reviewing the existing long-term contracts, options to take maximum input tax credit of the purchases, services, and expenses. All the changes and updates should be their responsibility as well.

STEP 5: VAT Registration

In order to be part of the new law, the businesses that fall in the tax bracket has to register themselves first.

STEP 6: Maintainance of Records

All the financial and transactional records have to be properly maintained by the firm so that in case of any anomaly they can use it for the refund as well. The management and senior staffs need to ensure the bookkeeping is legitimate and up to date at any given instant.