Special notice for restaurants and merchants using POS and ERP systems in the UAE:
Making sure your Point of Sale (POS) system is compatible with the UAE’s new Value Added (VAT) Tax is critical. Effective January 1, 2018, a 5% tax was added onto the purchase of goods and services as a new source of income. Still, many small and medium sized businesses have failed to meet the deadline to comply with VAT Tax law. The Federal Tax Authority recently extended the deadline to pay the first round of VAT taxes to April 30th because so many businesses weren’t ready.
Some businesses have already been fined and issued tickets for being non-compliant or failing to register. If you haven’t made the switch with your Point of Sale and ERP systems, you need to do so immediately.
Steps to VAT Tax Compliance
- Registering Your BusinessIf your business has annual revenue exceeding AED 375,000 you are required to register with the Federal Tax Authority. If your business earns less, or is expected to earn less, registration is voluntary.
- Training Your StaffEmployees must be trained to handle the VAT tax in transactions, how to calculate the tax, and what goods and services are included. Documenting the training and dates delivered, and the staff names participating, is a best practice.
- Accounting, Auditing, And PricingYour current systems, from your supply chain through sale, need to be audited to make sure you are compliant in each step. You will need to make sure your systems will attach the VAT tax to any sales so that you can collect the correct amounts. Your accounting will also need to track the collections and prepare the payments. With the additional workload, and potential compliance costs, you may need to consider product price adjustments to underwrite the additional costs.
- Required Record KeepingVAT legislation requires stringent record keeping and an audit trail:
- VAT invoices
- Debits and Credits
- Import/Export Paperwork
- Recording of any Good and Services Provided at No Charge or Private Consumption
- Zero-Rated or Exempt Goods and Services
- Filing Your VAT Taxes
- Paying Your VAT TaxRegistered business are required to file a VAT tax return typically at the end of the month following a reporting period, which could be monthly or quarterly. Check with the Federal Tax Authority for specific details. Paying the VAT tax can have cash flow implications, especially if not managed properly.
Is your point of sale system VAT tax ready?
If not, consider Linga POS, which includes basic ERP functions as well. Not only can it handle the VAT Tax, but it can handle multiple currencies and languages, split checks, table management, and back office reporting. Linga POS is a full function solution that provides everything you need to run your business:
- Point of Sales
- Back Office
- Reporting and Analysis
- IOT Device Control
- Gift Cards and Loyalty Programs
- Multi-Store Management
- And More
Additional Questions About VAT Tax
If you have additional questions about the VAT tax, its implications, or implementation, consult the UAE Ministry of Finance.