Why Registration for VAT should be your last step towards VAT preparedness
Tax is no longer a myth in GCC and soon VAT will impact all individuals/companies in GCC countries. After the registration process of VAT has started, many companies consider it as first step towards VAT transition. Although it is very important to timely register your company with tax authorities to avoid any hefty penalties, it is also very crucial that companies should prepare themselves for VAT and be ready for the change on urgent basis. VAT registration deadline is already announced by tax authorities. Majority of companies which cross the threshold should not delay registration by November end but still other time consuming and vital steps should be taken on priority basis. These steps include but not limit to:
1. Update Accounting Software
Many companies in GCC are using outdated versions of ERP's/Accounting software which don't cover all GCC VAT features. Many bespoke software companies are providing European solutions but only few people understand that GCC VAT is unique and other countries VAT relevant software can't fully comply with local needs. A customized solution with local VAT features therefore needs time to develop and organizations should shift to upgraded ERP's and train their staff on new software as early as possible. Further since authorities may prefer financial records in Arabic for review, a bilingual customized solution may be the solution companies should look for.
2. Staff Training
Only staff with accounting knowledge is not sufficient for VAT compliance. Organizations should send their finance teams to VAT workshops to make them understand industry specific dynamics and impact of VAT on their organization.
3. Pricing Strategy
Price lists update and pricing strategy also needs revision on urgent basis. Companies should start planning for revised price lists and contract terms to avoid any future inconvenience.
4. Invoice Format Revision
Tax authorities have advised all companies to revise invoice formats and tax invoice should be issued to all of their customers. Any missing information suggested by tax authorities in invoice can lead to hefty fines.
5. VAT Agent Appointment
Tax authorities have suggested companies to appoint tax representatives. Choosing right consultant can be time consuming exercise. Don't fall prey to opportunists with little knowledge of market and inexperienced staff. Competent consultants with history of performance should be given priority.
6. Cash flow Planning
With higher prices due to VAT inclusive purchases companies should plan their cash flow and budget any additional funds required in future. Moreover since Output VAT is a liability payable every quarter, companies should ensure that the tax collected should not be used elsewhere or late deposits to authorities can lead to huge penalties or jail terms in case of default.
7. Bookkeeping & Records Archiving
As per tax authorities companies should keep all their financial records including invoices, bills, vouchers for 5 years minimum. Companies should have a clear road map to archive their future financial data. This may include allocating more office area for financial archive or storing it smartly on cloud based systems. Back up plan for data lost should also be part of your plan to avoid unforeseen incidents. It is pertinent to mention that from now onwards even small companies who are not eligible for VAT registration also need to keep books of records.
Disclaimer: Brainstorm Accounting & Bookkeeping may not necessarily agree with all views of the blogger. Any suggestions/comments are welcome. For any VAT or other financial consultancy related inquiries please contact: email@example.com