VAT readiness: Small steps can help you big time
Businesses should look at the tax as a value that they can bring to their efficiency software
It might be easy to become overwhelmed by all the preparations that need to be done, especially as the deadline for the value added tax (VAT) draws closer, but experts say that businesses will have an easier time if they take small steps.
Speaking at the KT-ICAI VAT Clinic event at Khaleej Times, Mayank Sawhney, director of MaxGrowth Consulting, said: "The advice that we give right now is to accept that the VAT is going to be a reality. Once businesses understand this, then they should also look at it not just as a cost that they have to incur, but a value that they can bring to their efficiency software."
He also noted that given that this is the first form of taxation that has been introduced in the UAE, many businesses will need to hire professionals who have been exposed to the taxation to help them through the initial period.
"Start with a VAT impact assessment that will zero in on each and every transaction of the business, and understand what is the implication of that. The second step is implementation, which involves getting the proper systems in place and reworking your processes. The third step is the execution of the implementation, which involves changing your contracts and the way your business practices happen. Break it down into baby steps; you can't do everything together."
Similarly, Anurag Chaturvedi, senior director at Horwath MAK, a member of Crowe Horwath, noted that businesses need to understand their transactions.
"In our opinion, what we have realised when we speak to our clients is that there are a lot of businesses that fall in the mixed category. When we do an impact assessment, we really find out what is important at the moment. This involves looking at their transactions and breaking them down into a series of steps. Now, individual steps in a particular transaction may have a different tax treatment and implication. Businesses need to really take this as an opportunity to re-engineer their processes, and look into whatever systems they might have, in order to take into account the full impact of VAT," he pointed out.
"It's really not the law itself that is causing issues, but how businesses have to make sure that they have the discipline of ensuring that their business processes are systematic and transparent in a manner where information for compliance is ready when needed," pointed out Pavithra Balaji, stat to tax leader at GE, another expert at the event.
She also advised businesses to look at how the VAT law fits within their existing processes.
"What should I change in order to get my systems where they need to be? Start with your activity lines, and what is happening over there. Ask yourself if you are simply doing something for convenience. In this part of the world, we haven't been subject to this much transparency and auditing from a regulatory authority in the past. Are you in a position to defend yourself and the transaction legally, and move on from there?"
Naveen Sharma, chairman of the Institute of Chartered Accountants of India - Dubai chapter, said that a lot of the fundamental shift will come in improvising the accounting systems.
"Earlier, a lot of people were not accounting under the International Financial Reporting Standards [IFRS] and this is a pity because a lot of the information that the VAT prescribes is already in there. Shifting to the IFRS will help businesses with their accounting so that the VAT can be properly implemented."
"The law itself is very clear about what is required, but the real challenge is shifting your systems to ensure that you have the proper data," he added.
Source: Khaleej Times > Business > Rohma Sadaqat