VAT In UAE: The Meaning Of VAT For Your Business
- Value Added Tax or VAT will be compulsory for businesses operating in the UAE with an annual revenue of more than Dh375,000 and will be charged at the rate of 5%. Failure to comply may result in severe financial penalties
- VAT differs to the sales tax already charged in the UAE, it is applicable for goods and services and is charged at each step of the supply chain
- There are requirements for tracking and reporting this complex tax, you will need to review your IT infrastructure to ensure the current systems are robust enough to handle the complex processes
- Enterprise Resource Planning software is key when it comes to VAT compliance, to introduce standardisation businesses-wide and automate processes
- Download the Deltek guide to ensure your business is fully prepared.
A New Type of Tax
The UAE is introducing Value Added Tax (VAT) in 2018. Non-compliance may result in severe financial penalties. Find out how this affects your architecture and engineering business.
The 1st January 2018 marks a major milestone for architecture and engineering businesses in the United Arab Emirates (UAE).
Value Added Tax or VAT will be compulsory for businesses operating in the UAE with an annual revenue of more than Dh375,000 and will be charged at the rate of 5%.
As a mandatory tax, those businesses that fail to comply with the stringent VAT regulations may encounter severe financial penalties.
So what do you need to know to prepare your architecture or engineering business for VAT compliance?
Are you on track for VAT compliance?
VAT In The UAE
Let’s start by clarifying exactly what we mean by VAT.
VAT is an indirect tax or consumption tax that is imposed on most goods and services that are purchased and is charged at every step of the supply chain.
VAT is one of the most common types of consumption tax or indirect tax globally, with more than 150 countries using VAT tax to date.
VAT differs to the sales tax already charged in the UAE. Sales tax is only for purchasing goods or products and is only charged to the final customer. VAT, on the other hand, is applicable for goods and services and is charged at each step of the process to level the playing field. The introduction of VAT therefore poses a major change for the UAE.
The Meaning Of VAT For Your Business
Architecture and engineering businesses like yours will need to register for VAT and submit VAT returns quarterly.
With this frequency, you will need quick and easy access to the right reports and information to submit returns and show compliance. In order to pull together these reports, you will need to manage and maintain accurate financial records to avoid unnecessary manual work or penalties for non-compliance.
Unfortunately it’s not simply the case of tacking a percentage on top of every transaction in order to be compliant.
There are requirements for tracking and reporting this complex tax, such as correctly coding all accounts payable and accounts receivable transactions. To comply, you will need to review your IT infrastructure to ensure the current systems are robust enough to handle the complex processes.
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In our experience, businesses can waste days manually tracking transactional data in disjointed Excel files or other home-grown finance systems - this leads to wasted time, data entry errors and inconsistent processes, which all lead to risk.
Do you have the systems and infrastructure in place to support this? If not, you won’t be alone. Many businesses in the UAE do not have the infrastructure to handle VAT regulation efficiently. After all, it’s a new requirement. So where do you go from here?
Are you on track for VAT compliance?
How Enterprise Resource Planning (ERP) Software Supports With VAT Compliance
Enterprise Resource Planning or ERP software is key when it comes to VAT compliance.
Ultimately these systems enable businesses to quickly and accurately track, manage, report and audit financial details like VAT, along with the other core financial, resource and project management functions.
They introduce standardisation businesses-wide and automate processes, allowing your financial teams to maintain the right level of control to maintain the integrity of your financial records and support VAT compliance.
If you don’t have an ERP system in place and your business needs to register for VAT, ERP software is really worth looking into.
How Can Deltek Help?
Deltek has provided ERP solutions to architecture and engineering businesses worldwide for over 30 years, supporting the needs of more than 22,000 global clients across different sectors and 12,000 in the architecture and engineering arena.
What’s more, it supports VAT compliance and has done since VAT was first introduced in other corners of the world over 30 years ago. And, we can easily help multi-national businesses that work across different countries, some of which have to comply with VAT and others that don’t.
We have the tools and expertise to help you implement the right technology to ensure your business is VAT compliant, your projects profitable, and service delivery seamless.
Are You VAT Compliant?
Find out how your business can prepare, with our free eGuide.
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