How will VAT in the GCC affect your ERP solution – Questions and Answers from presentation
We had a fantastic response to our first GCC VAT webinar where we had many questions asked of us. Below are all the official questions that came through with our answers for you.
Question: I think only two new GL required for VAT in ERP?
Answer: Traditionally, tax has been reported form your GL and some solutions will still do this and when reporting from your GL, you will need more than one GL code for VAT. However, the correct way is that you should be able to reconcile your VAT back to the GL accounts but other than that, all VAT reporting should be done from your transactional data. This means 2 GL codes, one for AP and one for AR is perfectly sufficient.
Question: Is VAT applicable for Intercompany transactions?
Answer: Whilst the tax may be out of scope of VAT for certain transactions, any invoice sent between two legal entities is considered a legal transaction so an invoice is needed and tax is needed on that invoice even if the tax is 0%. So whilst the tax may be out of scope for VAT has still been determined and recorded. You also need to report the sales as part of total sales on VAT returns.
Question: In VAT in the EU there is the requirement that foreign currency invoices raised by the UK supplier to the UK customer has the VAT value expressed in Sterling will that be the same in the GCC system?
Answer: It is essential to display the exchange rate that you have used on customer invoices and likewise use the exchange rate provided on supplier invoices. Click here for a detailed explanation to this question.
Question: Are there requirements in the GCC to get approval for new accounting systems?
Answer: I do not know this. I think providing that your accounts have been signed off then you can use any accounting system including excel. The larger your company becomes the more rules will need to be followed and so an accepted solution would be a better option.
Question: Will VAT rates and deductability differ from Emirate to Emirate in the UAE?
Answer: I am not 100% sure on this but my opinion will be no – not initially anyway. Difference VAT treatment would create an unfair advantage to one Emirate over another. Where you may see incentives are within development ones that may attract a VAT free status.
Question: Is VAT applicable for Free Zone entities in UAE?
Answer: This has not been confirmed yet but is unlikely. Free Zones serve a purpose to make it easy for international firms to set up and to also offer 0% corporation tax. There are enough advantages for VAT to be free also.
Question: How do excise and duties impact the VAT in GCC?
Answer: Excise and customs taxes should be treated differently to VAT and often come under different laws. So from a VAT solution set up you can ignore the excise taxes as you will be invoices separately for these.
Question: Can we guide our client for tax avoidance – to take tax credit through purchasing the products for their supplier?
Answer: This is not a subject I would recommend! Many tax authorities are now imposing penalties including fines and prison time for companies that are seen to aid in tax avoidance. Whilst unlikely to be in the GCC yet, it could be something that is introduced later. VAT avoidance should be ‘avoided’ but there is no harm in structuring your entities to take advantage of VAT in other ways.
Question: Related to my prior question, how will import VAT be handled in UAE?
Answer: Generally, import tax would be reversed charged by yourself so you will be responsible for capturing and reporting the VAT due.
Question: What’s the timing on vat declarations? monthly, quaterly?
Answer: Currently they are set to be quarterly.
Question: How many potential tax codes need to be set up in total for the six GCC countries included the Emirates within the UAE?
Answer: If you are using SAP you will need a lot of rates for all 6 countries and the same is true for Oracle – the difference is that with oracle there are not the same restrictions for the tax code length. We use a standard naming convention globally.
Question: Is it possible to have different VAT rules on the UAE?
Answer: Absolutely – each country can have different tax rules and even different industries will have different rules but no company will have special treatment.
For anyone that missed this first webinar on How GCC VAT will impact your ERP system, a recording of this session can now be viewed by clicking here.
Worried about GCC VAT? Don’t be, we’re here to make life easier. Find out how our fixed price, fully automated GCC VAT solution can help you today Click Here to find out how we can help you today.
Managing Director, Oracle Fusion Tax/eBTax expert at Innovate TaxAndrew Bohnet is the current chair for the Oracle Tax Management SIG. He founded Innovate Tax to offer clients complete tax solutions making the most of the rich functionality of the R12 and Fusion tax modules. Whether it is analysis, design, configuration or support, Innovate Tax provide an unparalleled service when it comes to a complete tax solution. Having worked on one of the first Oracle R12 implementations in Europe, Andrew was exposed to the tax module early on and worked closely with Oracle to fix bugs, enhance functionality and present on numerous occasions on the subject of tax and Oracle. When it comes to presenting on eBTax, you wont find a more experienced consultant outside of Oracle.