VAT Roll Out in GCC and Role of ERP

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Whilst GCC finance ministries are progressing to finalize the implementation of VAT in the region by Jan 2018. lack of detailed guidelines raising several questions in the businesses. The certainty is limited to the rise in inflation, applicable rates, and effective date. There are several key aspects that are part of preparation and planning but not limited to a strong ERP, qualified finance resources, and clear processes.
UAE finance ministry has confirmed that the first phase will require all companies with revenue exceeding 1 million dollars to register in the VAT regime. It is estimated that more than 300,000 companies will be impacted with the new reforms.
FAQ in Ministry of Finance site clearly highlights the importance improving financial record keeping, technology, and Financial and accounting resources to make this shift smoother and avoid resulting non-compliance and penalties.

How ERP can help in better management of Value Added Tax:

Companies that will be subject to VAT compliance will need the following:
  • Submission of periodic VAT returns electronically
  • sharing of underlying supporting documentation
  • Charge taxes and make payments to authorities
  • Maintain records for future references and inspection
  • Setup VAT deduction on inter-company transactions
  • Follow formal invoicing with sequential numbers
  • Avoid deletion of any official documents in the system.

Accounting / ERP solutions that are primarily designed for high-level internal controls and those endorsed by big 4 and global bodies shall be extremely useful to gain the trust of tax auditors and relevant authorities.

Credible high-end ERP can setup the following features for VAT

  • Controls the proper sequencing of documents with up to date log
  • logs any deletion of invoices and reduces the likelihood of fraud or non-compliance
  • Serves as a document management system also input and output taxes can be linked to automate the tax liability calculation
  • Modern ERP system comes with a great level of flexibility and accordingly these systems can be customized to generate VAT returns as per the filing format.
  • Automate the calculation and deduction of VAT.
  • Designing dashboards and reports to have an impact on business from VAT.

In addition to strong MIS, companies need to pay particular attention to the quality of finance team. GCC market has been an ideal destination for finance talent and sourcing of good people wouldn’t be an issue.

VAT is going to be a game changer in elevating the status of accountants within the region. In addition, accountants will also have greater responsibilities and accountability.

A recent survey made by Maxcon experts find out that almost 40% companies in the region are unhappy with their ERP software. In the future selection of ERP, VAT application is going to be a major consideration for the companies.

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