Impact of VAT on Different Departments

An Organisation is formed when people possessing varied skills and mindset come together to achieve a common goal i.e. organizational goal. Normally, these people are divided into different teams/Departments as per their skills and caliber.

Every big organization nowadays has departments such as purchase/procurement, Sales and Marketing, HR, Admin, and others. Every department has its own set of functions which contributes to the overall functionality of an organization.

After Implementation of VAT in UAE, these departments, specifically the people working in the departments i.e. Employees need to undergo proper training of VAT which will aid the organization to achieve their goals and become a fully VAT Complaint organization.

Let?s Discuss this department wise and their role in making a business fully VAT Complaint.

Firstly, we cater to the functions of Purchase / Procurement department that is to purchase the necessary raw material/ products at a minimum price without compromising on quality. Now here VAT implications are different for various scenarios like

  •    Whether the supplier is VAT registered or not,
  •    A supplier is from outside UAE or A foreigner or from any GCC implementing Country.
  •    All these scenarios ascertain the liability of VAT accordingly, which will impact the price of the product and eligibility of Input VAT credit.

The employees of the purchasing department should be aware of the conditions, on the basis of which a business can claim the input tax credit and also the goods on which the credit is restricted as per UAE VAT law.

In the same way, when it comes to the Sales Department, the organization/supplier should be aware of the below facts:-

  •   Whether the customer is VAT registered or not. If yes, then he has to issue a TAX INVOICE with correct TRN (Tax Registration Number) of the Customer.
  •   The other consideration is that whether the Customer is from UAE or Outside UAE but within the GCC Implementing states, which will have several different implications of VAT, to cite an example,if the customer is not in UAE then it is deemed as exports and it will be considered as zero-rated but supplier should maintain proper supporting documents of Exports as required by the law.

The HR department should be aware of the Decree Law and Executive Regulations which talk about the benefits given by an employer to their employees and their VAT treatments. There are many points in this regard and vat implications:-

  •   Remuneration to directors,
  •   Treatment of Insurance Benefits to the employees and their family, transportation facility, incentives and facilities available at the workplace.

The HR department should consider all the above points while framing the HR policies of an organization.

Administration Department which is taking care of routine and regulatory expenses of the business should be well aware of the VAT Laws regarding how and for which products they can claim the VAT credit and inform these expenses within the proper time frame to the Finance Department to be eligible for such credit.

For the proper compliances of VAT, every department needs thorough training. Many Tax Advisers in Dubai are providing consultation and training to the employees. Tax Management firms in Dubai are giving ease to VAT implementation and compliance process by providing their valuable services. Best Tax Consultants always believe in making people informed regarding the recent changes.

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