GCC VAT Solution Presentation

ISYX VAT Solution – GCC VAT
Readiness Plan
Sandeep Mahindra

What is VAT for GCC ?
CONFIDENTIAL @ Copyright 2016. All rights reserved
• VAT is an indirect tax applied on the consumption of
most goods and services. VAT is levied by VAT registered
businesses that supply goods and services in the course
or furtherance of their business. VAT is also applicable on
the import of goods.
• VAT is levied at each stage in the supply chain and is
collected by businesses on behalf of the government.
• VAT is ultimately incurred and paid by the end consumer.

VAT | How it Work ?

Key Features – VAT GCC Framework
• The standard VAT rate will be 5% unless a zero rate or exemption applies.
• The Member States have the right to subject the following sectors to a zero rate or to exempt them from VAT:
• Education
• Health
• Real estate
• Local transport
• The Member States have the right to subject the oil sector, petroleum derivatives, and gas to a zero rate of VAT.
• Individual GCC countries have the right to subject certain food products to a zero rate of VAT.
• The Member States have the right to subject medical supplies to a zero rate of VAT.
• Intra-GCC and international transport will be subject to a zero rate of VAT.
• The export of goods to jurisdictions outside of the GCC Member States will be subject to a zero rate of VAT.
• The Member States have the right to exempt Financial Services from VAT. The term financial services is not defined but
broadly the exemption will generally relate to dealings in money, securities, foreign exchange and the operation and
management of loan accounts, deposits, trade credit facilities and related intermediary services. The exemption is not
expected to extend to fee based services transacted by a financial institution. However, Member States may choose to apply
different VAT treatments to financial services if they wish.
• Supplies of goods and services from a VAT registered person in one Member State to a VAT registered person in another
Member State are subject to the reverse charge mechanism.
• VAT grouping appears to be permitted between two or more legal persons resident in the same Member State.
• The treatment of GCC free zones is not addressed and it is left to each Member State to determine its own VAT treatment for
free zones.
• Businesses with an annual revenue of over AED 375,000 will be required to register for VAT purposes.
• Businesses with an annual revenue between AED 187,500 and AED 375,000 will have the option to register for VAT purposes.

VAT Transaction Types

Transaction Type & Treatment

VAT Authority Expectation from Business
• Registration: Mandatory registration for VAT for all businesses exceeding a specific
VAT registration threshold. In simple terms, only businesses that meet a certain
minimum annual turnover requirement will have to register for VAT.
• Submission of Legal Reports:
• Filing of periodic VAT returns with the tax authorities (either monthly or
quarterly)
• Remitting any VAT payable by a specified date.
• Record keeping: For all business transactions:
• Tax invoices
• Debit or credit notes
• Import and export records
• Records of goods/services provided for free or allocated for private use
• Zero rated or VAT exempt supplies and purchases
• e-Invoice: Copy of all customer invoices to be replicated at government system
(expected to be future requirements)

VAT Risks Example : KSA Govt. Announcement

Business Challenges – GCC VAT
Pressure from the authorities for Legal Compliance
/ Penalties on late submission and incorrect
reporting /
Demand for accurate VAT reporting
Deadlines for submitting VAT returns /Cash
Management & Tax Liability
Impacts entire sales and purchase transactions
and resultant Data Integrity / Master Data
changes and validations
Complex rules (e.g. Cross-border services,
Transition Rules, mixed supply)
Industry specific VAT
requirements

IT Challenges – GCC VAT
Need to deliver a standardized approach to supporting
VAT for ERP users with low TCI to drive business
continuity
Consistent upgrade path for VAT functionality
Total Cost of Development for custom VAT
applications, Forms and Reports increase the
overall TCO
Maximized use of standard ERP
functionality
A solution aligned with the long-term direction of
ERP products
High pressure from government to ascertain
compliance versus high effort , restricted time line and
limited budget

VAT Compliance - Challenges
■Inaccurate & delayed VAT returns can attract penalty
■Complex rules to manage special conditions
■Interfaces and ERP customizations may pose
additional challenges for VAT enablement
■Impacts entire supply chain and related financial
accounting
■Regression testing of ERP and all connected systems
■Managing transition scenarios such as Taxable Goods
/ Services Sold Before 1 January 2018 and Returned
On Or After 1 January 2018
■Sub optimal implementation of VAT can even result in
cash flow issues for organization

Standard Supply – VAT 5%
1 4Supplier
UAE
VAT
VAT
Import of Goods
Local purchases
Full credit allowed
Cost
Customer
Import VAT
India
Sale
Procurement of
Services
Customs duty
Service Provider
Supplier
VAT
3
ABC
2
Value AED 1000
+ Customs Duty@5% AED 50
AED 52.5
AED 1102.5
+ Import VAT@5%
Total
Value
+ Input VAT@5%
Total
AED 500
AED 25
AED 525
Value
+ Input VAT@5%
Total
AED 100
AED 5
AED 105
Sales
+Output VAT@5%
Total
AED 2000
AED 100
AED 2100
Month/Quarter end position Amount
Output VAT (Total VAT collectedon Sales) 100 (A)
Input VAT (Input VAT 52.5 + 25 + 5) 82.5 (B)
Net VAT Payable 17.5 (A-B)

Zero Rated Supply – VAT 0%
Africa
Customer
Export AED 2000
+Output VAT@0% AED 0
Total AED 2000
Full credit allowed
1 4Supplier
UAE
VAT
VAT 0%
Import of Goods
Local purchases
Cost
Customer
Import VAT
India
Export
Procurement of
Services
Customs duty
Service Provider
Supplier
VAT
3
ABC
2
Value AED 1000
AED 52.5
AED 1102.5
+ Import VAT@5%
Total
Value
+ Input VAT@5%
Total
AED 500
AED 25
AED 525
Value
+ Input VAT@5%
Total
AED 100
AED 5
AED 105
Month/ Quarter End position Amount
Output VAT (Total VAT collectedon Sales) 0 (A)
Input VAT (Input VAT 52.5 + 25 + 5) 82.5 (B)
Net VAT Refundable 82.5 (A-B)

Exempted Rated Supply – VAT Exempted
1 4Supplier
UAE
VAT
No VAT
Import of Goods
Local purchases
Cost
Customer
Import VAT
India
Sale
Procurement of Services
Customs duty
Service Provider
Supplier
VAT
3
ABC
2
Value AED 1000
AED 52.5
AED 1102.5
+ Import VAT
Total
Value
+ VAT@5%
Total
AED 500
AED 25
AED 525
Value
VAT@5%
Total
AED 100
AED 5
AED 105
Sale
Total
AED 2000
AED 2000
Month/ Quarter End position Amount
Output VAT (Total VAT collectedon Sales) Nil (A)
Input VAT Nil (B)
Increase in cost (P/L Impact) 82.5 (A-B)

RCM – Reverse Charge Mechanism - Sample
1 4Supplier
UAE
VAT
VAT
Import of Goods
Local purchases
Full credit allowed
Cost
Customer
Import VAT
India
Sale
Procurement of
Services
Customs duty
Service Provider
Supplier
VAT
3
ABC
2
Value
+ Customs Duty@5%
+ Import VAT@5%
Total Cash outflow
AED 1000
AED 50
AED 52.5 (RCM)
AED 1050
Value
+ Input VAT@5%
Total
AED 500
AED 25
AED 525
Value
+ Input VAT@5%
Total
AED 100
AED 5
AED 105
Sales
+Output VAT@5%
Total
AED 2000
AED 100
AED 2100
Month / Quarter End Position Amount
Output VAT (Total VAT collected on Sales+ VAT payable under RCM)(100+ 52.5) 152.5 (A)
Input VAT -Input VAT + Input credit under RCM(25 + 5 + 52.5) 82.5 (B)
Net VAT Payable 70 (A-B)

RCM – Exempted Business
No credit allowed
* VAT to be paid under RCM
(No credit allowed hence,cash payment required)
1Service Provider
Import of
Exempt
services
Sale
OutsideGCC UAE
CustomerABC LLC
VAT *
If the buyer makes an exempt supply, then amount of VAT
under RCM becomes a cost for the business. Below diagram
illustratesthe case.

OutsideGCC UAE
Full credit
allowed
* VAT to be paid under RCM
(Full credit allowed hence, onlya bookentry)
1Service Provider
Import of
services
VAT
Sale
Taxable CustomerABC LLC
VAT *
If the buyer makes a taxablesupply (Standard rate or Zerorated), then
buyer of the goods or services makes the declarationof purchase (input
VAT) and shows sales (output VAT) in their VAT return. In this way, the two
entries cancel each other from a cash payment perspectivein the same
return. Below diagram illustratesthe case.
RCM – Taxable Business

VATInvoiceTemplate

Cash Flow - Sample
2018
20/8/18
Aug
15/9/18
Sep Oct Nov
Purchases made
(Goods received)
Payment to
vendor made
(with VAT)
20/10/18 *
VAT paid to
government
Recovery
form the
customer
30/11/18
Cash blockage on account of VAT = 2.5
Cash blockage = 2.5
Cash flowneeds to be planned to optimize the workingcapital requirements
Goods Sold
(Delivered)
20/9/18
Outflow 52.5 Outflow 2.5Purchase 50
VAT 2.5
Total 52.5
Sale
VAT
Total
100
5
105
Inflow 105

Particulars Amount
Purchase Account / Service (Expense) Dr. (Value of Purchase)
VAT Input Account Dr. ( VAT on Purchase)
Bank/ Name of Creditor Account Cr. (Value of Purchase + VAT input)
Cash or Bank or Name of Customer Account Dr. (Value of Purchase + VAT output)
Sale Account Cr. (Value of Sale)
VAT Output Account Cr. (VAT on Sale)
Month end/ Period End Amount
Output VAT XXX (A)
Input VAT YYY (B)
Net VAT Payable ZZZ (A-B)
Particulars Amount
VAT Output Account Dr. YYY
VAT Input Account Cr. YYY
Net VAT Payable Account Dr. ZZZ
Bank Account Dr. ZZZ
PostVATAccounting

CONFIDENTIAL @ Copyright 2016. All rights reservedCONFIDENTIAL @ Copyright 2016. All rights reserved
VATReturnsCalculation

ISYX VAT Offerings - Options
• Option – 1 | ISYX VAT Solution on cloud to Integrate with any ERP/Application
• VAT Connectors for AX/SAP/IFS
• Patch upgrade and VAT Implementation Services
• VAT Assessment | VAT Readiness | Pre-Configuration | Configuration | Test & Run
• Option – 2 | SAP VAT – TAAS Solution and Sell our Focus Services
• Option – 3 | ERP VAT – On-Premise Solution and Sell our Focus Services

Taxable statuses
What is the taxable supply?
Place of supply?
4 Is there an Exemption?
Who is liable?
1
2
3
5
VAT Obligations

GCC VAT Engine
Engine
VAT legislation
Updates
Invoice
Facts
addresses
good/
Transport
Type
etc…
Single online
Code
Maps
VAT code
mapped
customer
Determine
VAT treatment
VAT
Expert Web
…
ERP
Real time
Interface
query
VAT
Expert Web
Input transactions
Re-coded/
Output
…
VAT Checker
Treatment &
Return boxes
Customer
Tax code
ERP
VAT
Code
lookup
Real time
Interface
Offline map of
customer tax codes
to key invoice
legislation
& facts

GCC VAT Engine
Fact
3…
Fact
2
Fact
1
VAT
Calculation
Legislation
VIES
Check
Compliant
Invoice
Reporting
Guidance

GCC VAT Reporting
Reporting
Check
Validation
Oversight and
review
INBOX
SAP
E
X
T
R
A
C
T
O
R
Oracle
E
X
T
R
A
C
T
O
R
XLS
ISYX VAT
Reporting
Reconciliations
Audited
manual
Adjustments
PDFs
XML
Fixed file
Real time
submission
VAT
Returns
ESL Intrastat VAT
books
Refunds Local
listings
Sales &
Purchase
Ledgers

GCC VAT Reporting
ISYX
VAT Reporting
Data collection
SAP, Oracle
connectors
Automatic
data checks
Exception
reports
Reconciliation
Review
VAT, listing &
Intrastat
filing
Text & XLS
import
Manual
input
Adjustment
Errors
Warnings
Correct
Oversight
Approve
Direct
Interface
Upload
file
Manual
PDF

SAP VAT Computation – TAAS | Tax Service

SAP VAT Compliance at a Glance

VAT Computation – TAAS | Tax Service

SAP VAT – Localization – Template & Notes
Microsoft Excel
Worksheet
Pilot SAP note GCC countries
2477105 - VAT implementation in Saudi Arabia
2456119 - VAT Baseline Package for UAE
2482967 - VAT Baseline Package for Qatar
2484173 - VAT Baseline Package for Oman
2502155 - VAT Baseline Package for Kuwait
2509484 - VAT Baseline Package for Bahrain
Minimum Pre-requisites :
- ECC Customers: SW component SAP_APPL – release 606 and onward
- S4 Customers: all releases of S4HANA - SW component S4CORE – release
100 and onward

ISYX’s VAT Service Categories - a 4 Pillar Approach
We are actively engaged with our partner network & tax authorities
Assessment
Services
Implementation
Services
QA
Services
Audit
Services
PartnerNetwork
Supported by Global Delivery/AGS/Education/ISYXLabs
Governmentagencies

GCC VAT Implementation Phase - Approach

Question and Answers

Sandeep Mahindra
+971-523261715

GCC VAT Solution Presentation

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GCC VAT Solution Presentation