VAT in UAE and Bahrain
VAT Implementation to multiply business Profit; Educate on VAT; VAT Tax driven business initiatives
VAT in UAE is into its 2nd year though a full-fledged Tax Year will only get completed by February 2019 with its Return filing by 28th March 2019. Federal Tax Authority, FTA, will have a full set of data of all the companies in UAE registered for VAT.
FTA may at any time commence the auditing of businesses registered for VAT. It is of utmost important that business gets a Health Check of its accounting record before a formal notification for the Audit is received. FTA may provide a minimum number of working day notice, before visiting the business premises.
Items, which may get verified, may include:
- Verification of all Supplies and Purchases disclosed in the VAT Returns
- Verification of all Receipts and Payments in bank statement(s)
- Checking that no disallowed Input tax has been claimed
- Checking if there is a need to file a Voluntary Disclosure.
- Availability of all Import record and its declaration in Returns
- Record of exports and declaration in Returns
- Availability of Profit and Loss account and Balance Sheet
- Proper filing of accounting record
- Availability of Inventory record and reconciliations
- Cash reconciliation
We provide Health Check services along with Advisory Services on the VAT Treatment of unique business transactions.
We are now into zone of effectiveness of VAT in Kingdom of Bahrain. National Bureau for Taxation, NBT is doing a 24/7 work to ensure a smooth implementation of VAT and its compliance. This is evident from their tweets on the number of calls received, number of queries received and attended to, number of businesses registered for VAT among others. NBT is periodically issuing various guides and varied FAQs on VAT related matters of importance and immediate attention.
One important thing should not lose sight of businesses that have been given option to register for VAT voluntarily on or before 20th June 2019. It is imperative for them to first get their Tax Invoice and VAT Accounting system in place before applying for it. We are now already in VAT effective zone. So one need to start charging VAT as soon as registration is approved by NBT.
If this is not enough, these businesses should also evaluate the amount of Input VAT Credit on their purchases including import, they are going to forgo till the date of their registration. It may be a catch 22 situations for many businesses. They have to weigh in their competitiveness, their readiness for VAT vis-à-vis Input VAT Credit loss.
The importer shall pay VAT at the time of import of goods into in Bahrain. However, a Taxable Person may apply to the NBT to defer payment of tax at import until the next Tax Return. NBT may allow the deferral of payment of Tax on import for select registered taxpayers. The requirements and procedures for import VAT deferral will be announced by NBT in due course. Till then, its an immediate cash outgo on account of VAT, claimable only during the filing of first VAT Return and thereafter.
VAT Return Form has not yet been published but an outline of it has been provided under VAT Legislation. In order to meet the VAT Return Form requirements including VAT Compliance, all taxable entities will need to make necessary adjustments to their Record keeping, Accounting System and Financial Reporting. It is recommended for businesses to seek advice or support from Professional Accountants when making necessary adjustments. Wherever necessary, one should also appoint an Advisor to assist one in determining the VAT implications for the various transactions to ensure that one is compliant with VAT from 1st January 2019.