Financial statements prepared and presented by a company typically follow an external standard that specifically guides their preparation. These standards vary across the globe and are typically overseen by some combination of the private accounting profession in that specific nation and the various government regulators. Variations across countries may be considerable making cross country evaluation of financial data challenging.

Publicly traded companies typically are subject to the most rigorous standards. Small and midsize businesses often follow more simplified standards, plus any specific disclosures required by their specific lenders and shareholders. Some firms operate on the cash method of accounting which can often be simple and straight forward. Larger firms most often operate on an accrual basis. Accounting standards prescribe in considerable detail what accruals must be made, how the financial statements are to be presented, and what additional disclosures are required.

A value-added tax (VAT), known in some countries as a goods and services tax (GST), is a type of general consumption tax that is collected incrementally, based on the increase in value of a product or service at each stage of production or distribution. VAT is usually implemented as a destination-based tax, where the tax rate is based on the location of the customer.

A sales tax is also a consumption tax, just like VAT. For the general public there may be no observable difference between how the two types of taxes work, but there are some key differences. In many countries, sales taxes are only imposed on transactions involving goods. In addition, sales tax is only imposed on the final sale to the consumer. This contrasts with VAT which is imposed on goods and services and is charged throughout the supply chain, including on the final sale. VAT is also imposed on imports of goods and services so as to ensure that a level playing field is maintained for domestic providers of those same goods and services.

Businesses will be responsible for carefully documenting their business income and costs and associated VAT charges. Registered businesses and traders will charge VAT to all of their customers at the prevailing rate and incur VAT on goods / services that they buy from suppliers. The difference between these sums is reclaimed or paid to the government.

VAT, as a general consumption tax, will apply to the majority of transactions of goods and services unless specifically exempted or except by law.

VAT is intended to help improve the economic base of the country. Therefore, we will include rules that require businesses to be clear about how much VAT you are paying for each transaction. You will have the required information to decide whether to buy something or not.

All businesses need to record their financial transactions and ensure that their financial records are accurate and up to date. Businesses that meet the minimum annual turnover requirement (as evidenced by their financial records) will be required to register for VAT. Businesses that do not think that they should be VAT registered should maintain their financial records in any event, in case we need to establish whether they should be registered.

May reclaim any VAT they’ve paid on business-related goods or services;

Keep a range of business records which will allow the government to check that they have got things right

If you’re a VAT-registered business you must report the amount of VAT you’ve charged and the amount of VAT you’ve paid to the government on a regular basis. It will be a formal submission and it is likely that the reporting will be made online

If you’ve charged more VAT than you’ve paid, you have to pay the difference to the government. If you’ve paid more VAT than you’ve charged, you can reclaim the difference.

Concerned businesses will have time to prepare before VAT will come into effect in January 2018. During that time, businesses will need to meet requirements to fulfill their tax obligations. Businesses could start now so that they will be ready later. To fully comply with VAT, We believe that businesses may need to make some changes to their core operations, their financial management and book-keeping, their technology, and perhaps even their human resource mix (e.g., accountants and tax advisors). It is essential that businesses try to understand the implications of VAT now and once the legislation is issued make every effort to align their business model to government reporting and compliance requirements. We will provide businesses with guidance on how to fully comply with VAT once the legislation is issued. The final responsibility and accountability to comply with law is on the business.

Taxpayers must file VAT returns with the FTA on a regular basis (quarterly or for a shorter period, should the FTA decide so) within 28 days from the end of the tax period in accordance with the procedures specified in the VAT legislation. The Tax returns shall be filed online using eservices.

Businesses will be required to keep records which will enable the Federal Tax Authority to identify the details of the business activities and review transactions. The specifics regarding the documents which will be required and the time period for keeping them will be stated in the relevant legislation (As of now business records will have to be maintained at least for five years.

Any taxable person must retain VAT invoices issued and received for a minimum of 5 years.

Penalties will be imposed for non-compliance. Examples of actions and omissions that may give raise to penalties include:

A person failing to register when required to do so;

A person failing to submit a tax return or make a payment within the required period;

A person failing to keep the records required under the issued tax legislation;

Tax evasion offences where a person performs a deliberate act or omission with the intention of violating the provisions of the issued tax legislation.

A supplier registered or required to be registered for VAT must issue a valid VAT invoice for the supply. To be considered as a valid VAT invoice, the document must follow a specific format as mentioned in the legislation. In certain situations the supplier may be able to issue a simplified VAT invoice. The conditions for the VAT invoice and the simplified VAT invoice are mentioned legislation.

VAT will not be deductible in respect of expenses incurred for making non-taxable supplies. Furthermore, input tax cannot be deducted if it is incurred in respect of specific expenses such as entertainment expenses e.g. employee entertainment.

VAT on expenses that were incurred by a business can be deducted in the following circumstances:

The business must be a taxable person (the end consumer cannot claim any input tax refund).

VAT should have been charged correctly (i.e. unduly charged VAT is not recoverable).

The business must hold documentation showing the VAT paid (e.g. valid tax invoice).

The goods or services acquired are used or intended to be used for making taxable supplies.

VAT input tax refund can be claimed only on the amount paid or intended to be paid before the expiration of 6 months after the agreed date for the payment of the supply.

VAT is due on the goods and services purchased from abroad.

In case the recipient in the State is a registered person with the Federal Tax Authority for VAT purposes, VAT would be due on that import using a reverse charge mechanism.

In case the recipient in the State is a non-registered person for VAT purposes, VAT would be paid on import of goods from a place outside the GCC. Such VAT will typically be required to be paid before the goods are released to the person.

Step 1: VAT Advisory services - Consist of:

• Outline the VAT registration obligations and steps for applying for a VAT registration number.
• Review and amendment of contractual arrangements with customers and suppliers in order to properly map out all transaction types.
• Analysis of IT system and accounting requirements.
• Ensure that business is structured in such a manner as to avoid unnecessary cash outflow or absolute VAT costs arising, particularly on intercompany transactions.

Step 2: VAT Implementation:

Based on the outcome of the 1st step, our finance and tax teams will be available to implement changes in your IT systems and throughout your organization.

• We will make sure that the relevant books and records are maintained in the appropriate manner.
• Ensure that the accounts payable function evidences that Input VAT paid is recovered where permitted as quickly as possible.
• Ensure that the accounts receivable function understands when output VAT should and should not be charged and it is accurately accounted for at the correct rates.
• Update of the invoice templates to ensure that all relevant information for VAT Invoices are included.
• Assist with the VAT registration with the competent authority.
• For small SMEs, we can provide a set-up of a simple accounting systems and implementation of VAT rules, through our outsourced accounting services.
• For larger SMEs, we can assist your finance team with the implementation and provide outsource CFO or Finance Manager Services on a monthly basis in order to strengthen your team.

Step 3: VAT Training and Post Implementation Support.

We understand that change can be a difficult thing that is why we will deliver tailored VAT training for your teams to assist with the transition in to VAT. Our specialist VAT advisory team will also be on hand to provide post implementation support and guidance during the project to ensure all agreed deliverables are delivered.

Step 4: VAT Compliance

• Advise on the application of the rules, especially on available exemptions, VAT treatment of intra-GCC transactions, imports and exports;
• Preparation and filing the VAT returns
• Assistance in claiming VAT refunds
• Update of the invoice templates to ensure that all relevant information for VAT Invoices are included.
• Assessment of the VAT implication related to: new business models, elaborated supply chains, asset purchases and transfers, M&A, etc