Introduction of VAT would not only bring change in the tax structure but it could change the way business is done. It would be a significant move with far-reaching implications.

VAT could impact almost every aspect and function of the business. Therefore, it is time for the business entities to assess the impact of VAT on their business. Following are few of the important aspects to be considered in the initial impact study which could be undertaken by professionals having good knowledge of business and VAT concepts:

• Understanding impact of VAT on key business functions.
• Requirement of realignment of key business processes i.e. supply chain, finance, cash flow, procurement, standard operating procedures in line with VAT.
• Identification of stress on cash flow due to change in mechanism of taxation.
• Understanding need for adaptation/changes in Information Technology systems.
• Impact of change in credit mechanism and understanding credit restrictions.
• Vendor management including educating the vendors.
• Understanding requirement of contracts/agreement modification in line with VAT.
• Understanding the transitional challenges.
• Understanding impact on registration and the responsibilities.

VAT is a consumption-based tax that applies to the use of goods and services. Businesses act as intermediaries, collecting and accounting for the tax on behalf of the government. However, the introduction of VAT has posed several challenges for both startups and established businesses.

Sigma Consultancy assists businesses through its VAT impact analysis in the following ways:

VAT Registration:

Not all businesses are required to register for VAT in the UAE. Our experts can help you out with the registration process and also determine the eligibility criteria. The government has set an annual turnover threshold of AED 375,000 for mandatory registration, while voluntary registration is applicable for turnovers reaching AED 187,500.

VAT Reporting:

VAT-registered businesses must prepare and file VAT returns with the Federal Tax Authority (FTA) at the end of each tax period. These returns include details of output and input tax, along with taxable supplies for the period. Such tasks can be complex and require expert skills. At Sigma, we handle the entire process smoothly, with no risk or errors in reporting.

Maintaining Proper Books of Accounts:

Accurate documentation of business income, costs, and associated VAT charges is crucial for VAT compliance. Inaccurate records can lead to fines, penalties, and reputational damage, while accurate records demonstrate compliance with VAT returns. That is why the professional accountants of Sigma play a vital role in maintaining comprehensive books of accounts.

Cash Flow Management:

VAT is payable at the time of purchasing goods or services, irrespective of actual sales to customers. This time disparity between VAT receipt and payment can create business cash flow challenges. Our skilled professionals can create proper cash flow management strategies, mitigating the risk of negative cash flows.

At Sigma Consultancy, we have a dedicated team of VAT experts who assist both new and established businesses in achieving VAT compliance and understanding its implications. Get in touch to know VAT’s impact on your business!