How to do VAT accounting in UAE?

VAT ACCOUNTING

VAT will be implemented as soon as next year arrives and every business will require to have their taxes managed along with their business. This could get tricky as the tax and VAT are new in UAE. VAT accounting will call for an expertise as it will need an error free solution and doing VAT accounting manually can also get time consuming, therefore, it is best to know about it in and out. As the rate of VAT varies from country to country the accounting will also differ. This sudden change in the finance system will demand as much VAT accounting skill as possible.
In order to understand how to do VAT accounting there are several other things that you will need to understand first. The important concepts in VAT are
• Economic activity
• Taxable person
• Supply
• Input tax
• Taxable supple reverse charge mechanism
• Tax group
• Exempted suppliers
Some important definitions before getting into VAT accounting :
1. Goods and services
Goods are the passing on of ownership of any property or the right to use the property as a owner to another individual. Services are anything that does not include supply of goods.
2. Business means
This is in the course of supply of goods or services that is the continuing activity of making supplies for the consideration. This activity should continue over a period of time and no private or personal activity will come under this.
3. Consideration
In the course of supply of goods and services consideration means anything that is received in return for the supply of goods and services. Consideration includes VAT that is received during the time of payment. Any personal or private activity does not come under this business.
4. Place of supply
The rules of this will be determined based on whether the supply is made in the UAE or outside UAE for VAT purposes. In case the supply is made outside UAE VAT will remain uncharged but if it is made inside UAE the VAT might be charged depending on the type of goods and services.
Now let us come to the main question how to do the VAT accounting?
RECORD KEEPING
• This starts with record keeping of taxable goods and services the you receive or supply as a part of your business and a separate record of any exempt supplies that you make or receive. These records need not be in a certain way of set but they should be updated and the figures used for VAT must be easy to locate.
RECORD OF SALES OR SUPPLIES
• To record your sales or supplies you can make a summary of your tax invoices and also keep copies of them. Make sure that your summary is in the same order as your invoices are and show separate totals at each rate of VAT for
 VAT on your supplies (cash or credit)
 Value of your sales excluding the VAT collected
 And any exempt sales
• In case you provide goods and services with no cost or take any goods from your stock for your use that must also go down in the record
 What the goods or services were
 The date you took the goods from stock
 The rate and amount of VAT chargeable
 The value of the goods or services excluding the chargeable VAT
In the end of each period one must add the VAT that is shown in all these records and transfer it to the VAT accounting as an output tax. Keep a daily record of the summary of sale, the amount of VAT charged and the amount of VAT that you have charged. The summary of VAT transaction is later on transferred to the VAT account.
RECORD OF PURCHASES
• Now coming to the records of purchase, the supplier’s tax invoices will show all the details. Make a summary of the invoices in the same order as the other summary file and also make a list of the invoices when you receive them (number the invoices and record them with the same number of the summaries made).
• Thee summary must show separate totals at each rate of VAT for the following:
 VAT on imports
 VAT that have been charged
 Cost of the purchases excluding VAT
• Keep a separate record of any business purchases on which the input tax cannot be deducted and these type of purchases are called “non deductible inputs”
CREDIT AND DEBIT NOTES
The credit and debit note should show similar details as the tax invoice so in place of tax invoice it should show tax credit note and tax debit note along with the value of the supply shown on the original tax invoice. An additional explanation as to what circumstances lead to the issuing of these notes and also enough information to identify the original supply.
RECORD OF IMPORTS
VAT is payable as soon as the goods are removed from the warehouse or at the time of import. If your business is registered with VAT to claim the VAT paid on the imported goods you will require to have an official evidence of the amount charged for example: a copy of the entry or any customer documents.

What are the VAT related accounting responsibilities of business?

When you register with VAT there are certain responsibilities that are to be strictly taken and as VAT accounting is a new subject in UAE the businesses might want to be very careful with this.
• The first responsibility is to register with VAT so the VAT is being paid legally and also to keep an account of how much your business has been charging.
• Then comes the record keeping that needs to be done accurately to avoid missing out on any detail and to avoid making errors.
• The typical responsibility will be to appoint an accountant who will manage the entire accounting and will manage the VAT accounting. His responsibilities towards VAT will be the responsibility of the business.

What are the books of accounts that need to be maintained for VAT?

The book of accounts is a must when you are doing VAT accounting, here is a list of book of accounts required in case of VAT accounting
• Annual accounts
• General ledger
• Sales register
• Purchase register
• Invoice issued or received
• Credit notes and debit notes

How long should these books be maintained for VAT ?

As per the federal law in UAE the commercial companies, it is said in article 26
• Every company will require to maintain proper accounting records showing its transactions and must disclose it anytime it is the accurate financial position of the company. The shareholders and partners must also confirm that the book of records maintained is completely transparent as per the law.
• Every company will maintain their VAT accounting books in its head office for a period of 5 years from the end of the financial year of the company.
• A company can maintain the records in an electronic form of all the original documents that will be deposited.

       REACHACCOUNTING

For easy VAT accounting there is always a way, as all these processes and daily records and details need not be handled by only by your accountant or you alone. Using a software that takes care of all your VAT records on the daily basis and keeps your book keeping error free is the simpler and smarter way to handle VAT accounting.
Reach accounting software is one of the best accounting software that takes care of your business from one end to the other. It is a complete accounting software that helps you with VAT accounting making it a simpler process without letting you struggle with the records, summaries and orders or serial numbers. It is designed to make your business management as simple and smart as possible as it can be easily implemented, is user friendly, can be customised and automates your entire business with several smart and useful features.

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