The value-added tax regime in the region will have a significant impact on business operations and profitability. Companies dealing in goods and services that invite the tax must understand and prepare for the implications. Similarly, entities that import products or transact with Zero-Rate or Tax Exempt entities must, at an initial stage, consider the impact of value-added tax.
Group of companies with operations in other GCC countries must carefully review the impact of intra-group and cross-border transactions. While there is a unified VAT agreement across GCC, each member state has the right to enact its laws within the broad framework. These different treatments have to be understood.
Step to being a value-added tax Ready:
Here is a simple four-step guide to support companies in the UAE to prepare for value-added tax implementation, which can take between 8 and 12 months. It may take prolonged if some of the activities are outsourced, for example, Information Technology.
1. Project preparation
Businesses require to prepare a project plan and secure the necessary internal and external resources and assure the stakeholders in the business are informed, as value-added tax is not just a finance project. It assumes all transactions, and so touches every aspect of the organization. Value-added tax affects IT systems, finance, human resources, legal teams, and even inter-organization transactions. Information Technology systems are integral to the process because they need to be updated to handle the value-added tax. Preparation will involve a cost that companies will require to be aware of.
2. Impact assessment
Businesses require to complete an impact assessment to understand VAT and its economic effects, prioritize issues, and prepare for implementation. This is a significant step as it sets the foundation for implementation. The evaluation looks at its many effects on the organizational, operational, and financial levels. Typically, an impression assessment requires between 8 and 12 weeks to complete, and that leaves relatively less time, no more than nine months, to influence implementation.
3. Design and implementation
Businesses require to design the systems and train their staff on the process requirements for VAT registration in Dubai. They must implement necessary changes to policies, handles, reporting, and governance. Based on the impact evaluation, they need to develop a road map for identifying the changes needed, understanding the scheduling requirements, and planning for work. Implementing the reforms across various levels in the organization usually begins with mapping the transaction footprint to understand the value-added tax obligations of the business. This should form the foundation for making changes across different verticals in the organization, such as Information Technology, supply chain, and human resources.
4. Registering and testing
Businesses require to register for VAT and check their business systems to ensure they are capable of compliance and reporting. Companies need to integrate the changes made into the operations and train appropriate staff about their current roles and responsibilities to accomplish the wanted result. Testing the value-added tax system, processes, and controls during a “live” phase (expected from January 1, 2018) is necessary to allow for the complete and correct completion of the first value-added tax return.
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