VAT is an indirect form of tax on consumption collected by an intermediary from a customer who bears the ultimate economic burden of tax. This is a first-time introduction of a major Tax across GCC which requires a holistic approach for understanding and implementation in order to be complaint with the law.
Our team has an extensive and diverse industries experience across GCC, South East Asia, India and UK along with VAT expertise that would help you with VAT implementation, registration and ongoing VAT compliance. We will also guide in planning your VAT optimization strategies. We at Haynes Path believe that to provide you with the best service, we need to first understand your business model to ensure that your business receives appropriate VAT services. Thus, we provide you personalized and customized consulting services that are in line with your business requirements.
VAT Consulting services are required for your business due to following critical elements:
Implementation of VAT is not just an accounting, finance or IT issue but it is a “Business Issue” which impacts all key functions of an organization - Finance, Information Technology, Legal & Compliance, Sales & Marketing, Supply Chain and Human Resource.
Fines and Penalties
Businesses need to consider the impact of non-compliance with the VAT regulations which may be imposed in the form of administrative fines and penalties and stricter criminal/civil liabilities. Some of the key aspects of VAT compliance are:
- Registration in line with regulations
- Accuracy and Timeliness of Return filing
- Accurate and Timely Payments
- Accounting and Reporting
- Documentation requirements
- Responding to VAT Audit requirements
Specific Complex Scenarios
VAT regulations have a few complex scenarios which require customized planning to ensure compliance with accounting, reporting and accurate preparation of VAT Return. Unless these scenarios are managed with immaculate planning and timely execution, businesses may suffer loss of Input Tax Credits and further may be subject to fines and penalties. A brief description of these complex VAT scenarios is given below:
- Partial Exemption – applicable where businesses are involved in the supply of taxable and exempt goods or services requiring them to allocate and proportionately claim the Input Tax Credits
- Reverse Charge – applicable where businesses are involved in Imports/Exports of goods or services from within or outside GCC
- Margin Scheme – applicable where second hand goods are acquired by a registered person from an unregistered person for the purpose of resale. VAT registered person will be able to account for VAT on sales of second hand goods with reference to the difference between the purchase price of the goods and the selling price of the goods (that is, the profit margin).
- VAT Grouping – applicable where businesses satisfy certain requirements such as being resident in the same member state and being related/associated parties. Such businesses will be able to register as a VAT Group which will not only simplify their Inter-Company transactions, accounting and VAT reporting but also facilitate and manage their Net VAT liabilities as a Group
- Composite Supply of Goods and Services – applicable where businesses are involved in the supply of goods and/or services, and there is more than one component to the supply.
- Different timelines of VAT Implementation in the GCC Member States – As the GCC Member States are not implementing VAT at the same time, this will add further complexities in Imports/Exports strategies, documentation, accounting, reporting and VAT compliance requirements of the businesses.
Transaction Based Tax
VAT is charged for value added at each stage of production or supply. Therefore, it is charged at the transaction level which needs to be accounted, documented and reported accurately and timely. A robust framework of policies and procedures, standard operating procedures supported by IT systems are required to be built in place for each transaction for appropriate recording, reporting, filling and compliance purpose.
Dynamic Compliance Requirements
Your business needs to be abreast of latest VAT developments and compliant with legislations as there can be fines and penalties for non-compliance. Such actions can tarnish your business image and hamper your reputation. It is vital that you have a partner who can guide and support you in avoiding such instances in the initial stages of VAT introduction.