Do I need to redraft all my sales and purchase contracts?
A) If the contracts does not have a clause on any taxes, you may have to negotiate with the vendors and customers to include the clause on taxation to have better clarity.
Why is it required to start preparing for VAT since the effective applicability is only from 1st January 2018?
A) Depending upon the nature and the volume of the business transactions, considerable amount time and effort may be required to implement VAT. In order to be on the safer side it is better to start the implementation process prior to the legislation. Assessing the existing systems will enable you to anticipate the changes required during the transition period.
For existing ERP’s which are VAT compatible, what are the changes that are required to be made?
A) Firstly the current business model needs to analyzed before making any changes to the existing systems. The next step would be to configure the ERP’s at the transactional level (i.e., making the invoices VAT compatible). Accordingly the business processes needs to be modified in order to accommodate the necessary VAT requirements.
What are the implications for businesses that are not ready for VAT by the beginning of 2018?
A) The implications can be profound. Not being sufficiently prepared to manage VAT by 2018 could see companies failing to comply with the VAT law of the country in which they operate. This could expose these organizations to fines and other enforcement measures, depending on the final version of the law. Some analysts expect tax authorities to be lenient on companies for the first few returns, due to the steep learning curve that they face.
What all goods & services are covered under VAT? Are there any exemptions in VAT?
A) VAT, as a general consumption tax, will apply to the majority of transactions in goods and services. Each country typically has its own specifications about what is taxable under VAT and we are still waiting to see what the VAT laws for UAE will dictate. However, a general trend worldwide is for certain products such as luxury goods (cars, perfumes and so forth) to be taxable under VAT, while basic food elements and services such as education, healthcare and the provision of utilities (such as water, electricity) are usually either exempt or zero rated.
Will all businesses need to register with the government for VAT?
A) No, not all businesses will need to register for VAT. There will be a threshold limit fixed by the government.