EDITOR’S QUESTION
Flexibility key while
adding VAT to ERP systems
Having various options in-built is key while adding VAT
functionality to an ERP system advises Monzer Tohme
at Epicor Software.
A
s an enterprise
application
vendor, what are
the best practices you
would recommend for
end users implementing
the GCC VAT module?
T
he clock is ticking. In January
2018, the UAE and Saudi Arabia
will adopt a Value Added Tax at
a standard rate of 5%, with the rest of
the Gulf Corporation Council to follow
after. The UAE’s Ministry of Finance
has explained in clear terms what is
required of businesses—that they will be
responsible for carefully documenting
their business income and costs, and
associated VAT charges.
The benefits of VAT are well
established. For business, compliance is
relatively straightforward and the tax is
neutral to economic hiccups and changes
in trading and distribution patterns.
Governments benefit from VAT being
a proven inflation-neutral system, and
Gulf governments in particular can be
assured of steady funding for public
spending, to cover any possible shortfall
in non-oil GDP in the midst of a dip in
petrochemical prices.
But benefits aside, being prepared
for VAT compliance can be a daunting
prospect. If you manufacture, distribute
or sell goods you need to understand its
impact, and have a working knowledge
Monzer Tohme is Regional Vice President,
Middle East and Africa, Epicor Software.
of input and output tax. You need to
understand the difference between
Standard, Zero and Exempt rates. How
will you manage VAT as it pertains to
your cash flow? What deferred-payment
schemes are available and how can you
optimise the timing of recovery of VAT
on costs?
If your business crosses national
boundaries, you need to consider the
requirements of customs authorities—VAT
will add an additional layer to import-
export regulations, and full compliance
will demand deft handling.
In addition to all of these
considerations, it is expected that there
may be many exemptions and exceptions
when it comes to intra-GCC transactions.
And there will remain the significant grey
area of government suppliers, where a
public agency may have its exempt status
suspended for the purposes of maintaining
a competitive market. Different industries
will need to address these complexities in
different ways, in addition to keeping on
top of their own sector specific issues.
Whether you run an integrated
enterprise resource planning system or a
standalone finance package, you will likely
have access to basic VAT functionality.
But compliance with new country-specific
regulations within the GCC may require
anything from mild configuration to
extensive procurement.
Whatever your scenario, aim for
extensible functionality and flexible options
that minimise the likelihood of financial
penalties. With a series of interlocking
global engines, you can easily configure the
rules that determine how transactions are
posted, where they are posted, how tax is
calculated, how currency is handled, and
how data is stored.
Demand flexibility, so you can add
the functionality that makes sense for
your business. The best solutions are
designed around core functions that
worldwide tax systems have in common,
with national variations as configuration
options. In particular, ensure your chosen
ERP system is capable of producing
the required level of documentation.
A comprehensive set of electronic-
compliance features is advisable, as is
a structured reporting framework that
can produce VAT submissions in a wide
variety of formats.
Remember that non-compliance can
have a detrimental effect not only on the
corporate purse, but on brand credibility.
Managing the intricacies of VAT regulations
is made a lot easier with the right
technology platform for commerce.
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