Introduction


VAT has been implemented in more than 150 countries around the world.A significant milestone in the GCC was achieved when UAE along with other GCC countries announced the adoption of indirect tax system, namely VAT (Value Added Tax).


The GCC countries under the GCC VAT Agreement have aiming to adopt 5 %VAT from 1st January, 2018. The VAT is the largest-ever tax reform in the fiscal history of UAE. It charts a new course for indirect tax system in UAE. Two of the GCC countries, UAE and Saudi Arabia have announced that they will implement VAT from 01 January 2018. Other GCC members are expected to follow within another year.


The VAT Law released contains stringent and high penalties for non-compliance make it essential that business ensure they are in a state of readiness. The short duration available prior to January 2018 makes it essential that adequate steps are taken timely.

Implications for Business


Working Capital requirements will increase and free Cash Flow will be adversely impacted due to the timing difference in paying the VAT upfront and collecting the funds at a later date.


Proper books and records need to be maintained by each business for a minimum period of 5 years (15 years for real estate companies).


VAT is a self-assessment tax and each business is a acting like a tax collector on behalf of the Tax Dept., so there is a high likelihood that there will be inspections and audits that might take place.


The impact of VAT is not restricted to accounts only and spreads across the business, so it is imperative that each business carries out an impact study timely to ensure that each staff is aware and there ERP is ready for proper input and output tax and reconciliations for submission. The implications would impact Sales, Procurement, HR, Legal, IT and Finance/Accounts.

Impact of VAT on your Business

How should companies prepare for the rollout of VAT?

What is the VAT impact on Business?

The following summarizes the four cornerstone issues to be considered:-


Financial Impact

Understand how the introduction of VAT can affect your business. There are two main challenges to consider, which is how the charge of VAT may increase the burden of the customer and how the ability to recover VAT may affect who your suppliers will be in the future.

Commercial Impact

Understand how receivers will react to the need to pay 5% VAT, which is often viewed as creating a tax burden. For suppliers who are unable to charge the VAT for commercial reasons, the reform is costly as the tax is borne as a cost which decreases the top-line profit.

Systems Impact

The issuance of the special VAT invoice, the resulting VAT reporting obligations, should be automated. The ERP will need to be adapted to cater for the requirements of VAT.

Legal Impact

Understand whether your contracts are structured in a way to allow you to charge VAT or not.

Are you liable to register?

A business must register if:

The total value of its taxable supplies made within the UAE, exceeds the mandatory registration threshold of AED 375,000 over the previous 12 months period, or;


It anticipated making taxable supplies with the value exceeding the mandatory registration threshold of AED 375,000 in the next 30 days.


If businesses have taxable supplies over AED 187,500 but below the above threshold then they are encouraged to register voluntarily. If the expenses subject to VAT exceed AED 187,500 it is recommended that one registers.


Entities with taxable supplies below AED 187,500 need not register.


Registration is now open and the deadlines are as follows:

All businesses with a turnover exceeding AED 150M should apply for registration prior to 31 October 2017.


All businesses with a turnover exceeding AED 10M should apply for registration prior to 30 November 2017.


All other businesses that must be registered by 01 January 2018 should apply for registration by 04 December.

What is required for businesses to be VAT ready?


Each business should timely have an internal awareness session to ensure that all employees are aware of VAT and have a basic understanding.


Engage a professional to carry out an impact study for their business.


Develop a proper plan to ensure that the systems are ready and the compliance steps are carried out timely


Execution phase where the system and outputs for filing are tested to ensure correctness of data and be “VAT ready”.

Possible hurdles:


Lack of understanding of VAT rules & regulations.


Compliance issues.


Lack of resources.(Availability of experts)


Improper book keeping system.


We can help you get VAT ready


We at Tulsija & Associates will help you with the implementation of VAT among your operations and VAT accounting.

The following are the services that we offer in regards to VAT:


  1. VAT registration

  2. Assistance for VAT Transitional phase.

  3. VAT Auditing

  1. Assistance for monthly VAT Payment

  2. Quarterly / Monthly VAT return filing

  3. VAT implementation and preparation of for migration form current accounting system to VAT compliant Accounting system.

Why Tulsija & Associates with VAT in UAE?


With so much pressure already building on companies to outperform, enhance their market standing and escalate profits to next level, seeking for accounts outsourcing services as well as tackling the new VAT Laws has become essential in today’s scenario.


By working alongside, Tulsija & Associates keep its clients informed about their business as they progress on a daily/monthly basis. There is absolutely no need to wait for the year to end to discover business’s standings and profits. Also, using advisory services of Tulsija & Associates is a more cost-effective and personable affair than establishing an in-house accounting and taxation team and adding extra expenses to the pocket.


At Tulsija & Associates we are backed by a team of qualified professionals who have immense experience in the field of accounts, taxation and auditing services.


Our team is well updated of the recent rules and regulations and offers advisory services to our clients for their betterment making sure that every venture is a success.


Our main aim is to reduce the overall cost, improve and automate the business process and enhance the turnaround time while assuring quality service.

We deliver the best outsourcing and advisory services to our clients and ensure high level of customer satisfaction.