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VAT implementation roadmap – Are you ready?
Contact usIn case of enquiries, please contact our team:
Robert Dalla CostaDirector | VAT [email protected]: +971 4 424 8932M: +971 56 415 8738
Ashok HariharanPartner | Head of [email protected]: +968 2474 9231M: +968 9932 4874
Nilesh [email protected]: +971 4 424 8987M: +971 56 683 3219
Wduht #Guhl} dPartner Management Consulting - ITA [email protected]: +971 2 401 4826 M: +971 56 508 5141
Dqnxu#MdlqSenior Manager, VAT [email protected] T: +971 4 424 8960
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the situation.
© 2016 KPMG, KPMG LLP and KPMG Lower Gulf Limited, registered in the UAE and member firms of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the United Arab Emirates. The KPMG name and logo are registered trademarks or trademarks of KPMG International.
A brief introduction to VAT
The GCC states are working together to develop a broad framework for the introduction of VAT. The framework agreement will set out the underlying principles of VAT laws for the six GCC countries, although there are likely to be areas where member states will have some flexibility. The UAE was among the first GCC member states to publicly announce the introduction of VAT, with a proposed effective date of 1 January 2018. VAT is likely to significantly affect nearly every UAE business in some way – and a 1 January 2018 start date leaves only a short window for businesses to prepare for VAT. Will you be ready?
Contact detailsT: +971 4 424 8932M: +971 56 415 8738 [email protected]
Rob Dalla CostaVAT LeaderKPMG in the Lower Gulf
Sale – materialAED1000 + AED50 VAT
*The example is calculated using a VAT rate of 5% on a taxable supply.
Sale – productAED2000 + AED100 VAT
Sale – productAED3000 + AED150 VATSale – product
AED5000 + AED250 VAT
AED150
AED100AED50
AED100AED50
Governmentincome AED250
How does VAT work?
RetailerIndividual
Wholesaler
AED150AED250
Factory
Supplier
While VAT is not intended to be a tax on business, collecting the tax and remitting it to the government will have significant compliance costs. There could also be cash flow implications. Supply chains need to be reviewed to understand the impact of VAT. VAT costs and accounting obligations will need to be identified so they can be addressed. There are also implications for IT systems. Adapting to VAT will mean updating or upgrading ERP and IT systems and interfaces to correctly capture input and output VAT. Governance frameworks will also need to be reviewed and updated to ensure policies, processes and controls comply - and continue to comply - with VAT legislation.
Background
– Rob recently joined KPMG in the Lower Gulf as a director.
– Before joining KPMG, Rob worked for another Big 4 firm as GST Director, assisting with the implementation of Malaysia's goods and services tax (GST).
– Rob has provided a broad range of taxation advisory and consultancy work for over 30 years, with a particular focus on VAT/GST. He was Vice-Chairman of the OECD Working Party that has been developing international VAT guidelines for cross-border services and is a key contributor to many international forums on VAT/GST, including the global VAT forums held in 2012 and 2014.
Professional and industry experience
As well as advising governments on VAT and GST policy issues, including drafting legislative amendments, Rob has advised local and multinational companies in Australia, Malaysia and the Lower Gulf (including Oman) on VAT/GST implementation, compliance and restructuring opportunities.
Introducing VAT in the UAE
VAT will impact:
Procurement and production– Supplier’s pricing– A/P invoice processing time– Purchases from non-registered– VAT businesses– Supplier education
Sales and marketing– Samples/marketing– Pricing strategies– Returned goods– Education of - and communication
with - consumers– Credit items
Finance– Bad debts– Deposits/advanced payment– Leases and hire purchase– Loan of stock and equipment– VAT return preparation– Disposal of assets– Sales of scrap
Human resources– Fringe benefits– Gifts to employees– Employees allowance and claims
Legal– Existing and new contracts– Are any payments based on revenue
or turnover (franchise or royalty arrangements)?
IT– System changes– Documentation (tax invoices)– Reports for VAT returns
Ankur Jain
Tareq Dreiza
September 2016
VAT implementation roadmap – Are you ready?
Contact usIn case of enquiries, please contact our team:
Robert Dalla CostaDirector | VAT [email protected]: +971 4 424 8932M: +971 56 415 8738
Ashok HariharanPartner | Head of [email protected]: +968 2474 9231M: +968 9932 4874
Nilesh [email protected]: +971 4 424 8987M: +971 56 683 3219
Wduht #Guhl} dPartner Management Consulting - ITA [email protected]: +971 2 401 4826 M: +971 56 508 5141
Dqnxu#MdlqSenior Manager, VAT [email protected] T: +971 4 424 8960
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the situation.
© 2016 KPMG, KPMG LLP and KPMG Lower Gulf Limited, registered in the UAE and member firms of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the United Arab Emirates. The KPMG name and logo are registered trademarks or trademarks of KPMG International.
A brief introduction to VAT
The GCC states are working together to develop a broad framework for the introduction of VAT. The framework agreement will set out the underlying principles of VAT laws for the six GCC countries, although there are likely to be areas where member states will have some flexibility. The UAE was among the first GCC member states to publicly announce the introduction of VAT, with a proposed effective date of 1 January 2018. VAT is likely to significantly affect nearly every UAE business in some way – and a 1 January 2018 start date leaves only a short window for businesses to prepare for VAT. Will you be ready?
Contact detailsT: +971 4 424 8932M: +971 56 415 8738 [email protected]
Rob Dalla CostaVAT LeaderKPMG in the Lower Gulf
Sale – materialAED1000 + AED50 VAT
*The example is calculated using a VAT rate of 5% on a taxable supply.
Sale – productAED2000 + AED100 VAT
Sale – productAED3000 + AED150 VATSale – product
AED5000 + AED250 VAT
AED150
AED100AED50
AED100AED50
Governmentincome AED250
How does VAT work?
RetailerIndividual
Wholesaler
AED150AED250
Factory
Supplier
While VAT is not intended to be a tax on business, collecting the tax and remitting it to the government will have significant compliance costs. There could also be cash flow implications. Supply chains need to be reviewed to understand the impact of VAT. VAT costs and accounting obligations will need to be identified so they can be addressed. There are also implications for IT systems. Adapting to VAT will mean updating or upgrading ERP and IT systems and interfaces to correctly capture input and output VAT. Governance frameworks will also need to be reviewed and updated to ensure policies, processes and controls comply - and continue to comply - with VAT legislation.
Background
– Rob recently joined KPMG in the Lower Gulf as a director.
– Before joining KPMG, Rob worked for another Big 4 firm as GST Director, assisting with the implementation of Malaysia's goods and services tax (GST).
– Rob has provided a broad range of taxation advisory and consultancy work for over 30 years, with a particular focus on VAT/GST. He was Vice-Chairman of the OECD Working Party that has been developing international VAT guidelines for cross-border services and is a key contributor to many international forums on VAT/GST, including the global VAT forums held in 2012 and 2014.
Professional and industry experience
As well as advising governments on VAT and GST policy issues, including drafting legislative amendments, Rob has advised local and multinational companies in Australia, Malaysia and the Lower Gulf (including Oman) on VAT/GST implementation, compliance and restructuring opportunities.
Introducing VAT in the UAE
VAT will impact:
Procurement and production– Supplier’s pricing– A/P invoice processing time– Purchases from non-registered– VAT businesses– Supplier education
Sales and marketing– Samples/marketing– Pricing strategies– Returned goods– Education of - and communication
with - consumers– Credit items
Finance– Bad debts– Deposits/advanced payment– Leases and hire purchase– Loan of stock and equipment– VAT return preparation– Disposal of assets– Sales of scrap
Human resources– Fringe benefits– Gifts to employees– Employees allowance and claims
Legal– Existing and new contracts– Are any payments based on revenue
or turnover (franchise or royalty arrangements)?
IT– System changes– Documentation (tax invoices)– Reports for VAT returns
PHASE 1: PLAN AND ANALYZE
NOW
Before the endof 2016
From 1 January 2018
During2017
PHASE 2: DESIGN AND IMPLEMENT PHASE 4: GO LIVE– Identify project resources– Map supply chains– Map business units and systems– Document key VAT touch points –
incorporate these into the VAT impact assessment (phase 2)
– Review existing long-term contracts which straddle VAT implementation
– Consider VAT clauses in new contracts and tender documents
WHAT SHOULD YOU BE DOING?
– Review legislation - when released - to validate VAT touch points identified in phase 1 - classify transactions for VAT
– Build input tax credit allocation model– Agree requisite IT changes with IT vendor– Build log to monitor and resolve issues
where the law or its application remains unclear
– Log transitional provisions in the long-term contracts register
– Validate the impact assessment– Action issues in log– Validate applicable transitional provisions
for long-term contracts– Test VAT systems (IT vendor)– Ensure VAT system reports are sufficient– Train staff
Registration– Register for VAT
– Test exceptions– Prepare and file VAT returns– Resolve any teething issues– Fine-tune compliance practices
VAT implementation roadmap ñ Are you ready?
PHASE 3: TEST, TRAIN AND REGISTER
How can KPMG help?
Project plans– Identify key stakeholders– Finalize and agree communication plan for
staff, suppliers and customersImpact assessments– Identify impact of VAT for senior
management– Provide inputs on VAT's IT impactTransaction maps– Map all relevant processes, transaction
flows and tax touch pointsContract reviews– Review existing contracts to identify the
material impact of VAT
Work products
Project plans– Project implementation plan– Resource plan– Roles and responsibility matrix– Communications strategy and materialsHigh level impact assessment– Presentation to senior managementTransaction maps– Business process impact requirements and
matrixContract review report– Overview of impact and high level resolution
plan– Recommendation of VAT clauses
How can KPMG help?
Legislation review and impact assessment– Determine tax drivers and functional design
requirements– Identify VAT decision flags based on legislation– Assess impact based on existing and future
business plansIT design– Review existing configuration– Analyze VAT requirements against existing
system functionality– Define solution architecture– Review and validate functional and technical
documents– Review configuration design documents
Work products
Legislation review– VAT issues and ambiguities logVAT approach recommendations– Documentation of implementation
decision pointsTax credit allocation model– Impact assessment modelIT VAT implementation– IT impact assessment report including:
– Solution architecture design – Functional ERP requirements – Impact on customizations – Master data assessment – Reporting requirements
How can KPMG help?
IT testing– Develop user acceptance test scripts– Support end user testing– Review VAT compliance reportsTraining and VAT manual– Prepare training calendar– Review end user training material– Develop VAT user manual to support ongoing
adoptionRegistration– Advise on registration– Advise on applicability of special VAT schemes
(such as forming a VAT group)
Work products
User acceptance testing– User acceptance test plan– User acceptance test scripts– User acceptance report– Tax reporting and filing testTraining and VAT manual– Reviewed training manuals– VAT process maps and manualsRegistration– Registration completion report and review
How can KPMG help?
VAT submission– Support throughout submission– Report on gaps and lessons learned
What are the benefits of being VAT ready?
– Maximize VAT recovery on business inputs– Reduce adverse impacts on cash flow– Ensure compliance with VAT obligations and reporting– Minimize risk of fines, penalties and reputational damage
Work products
VAT submission– Assist with - or review - VAT
returns prior to submission
