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VAT

implementation
roadmap
Are you ready?

December 2016
A brief introduction to VAT
The GCC states have worked together to While VAT is not intended to be a tax on
develop a broad framework for the business, collecting the tax and remitting it to
introduction of VAT. This framework the government will have significant
agreement sets out the underlying principles compliance costs. There could also be cash
of VAT laws for the six GCC countries. flow implications. Supply chains need to be
Member states retain some flexibility, such as reviewed to understand the impact of VAT. VAT
how to treat healthcare, education and free costs and accounting obligations will need to
zones for VAT purposes. The UAE was among be identified so they can be addressed. There
the first GCC member states to publicly are also implications for IT systems. Adapting
announce the introduction of VAT, with a to VAT will mean updating or upgrading ERP
proposed effective date of 1 January 2018. and IT systems and interfaces to correctly
capture input and output VAT. Governance
VAT is likely to significantly affect nearly every frameworks will also need to be reviewed and
UAE business in some way and a 1 January updated to ensure policies, processes and
2018 start date leaves only a short window for controls comply - and continue to comply -
businesses to prepare for VAT. Will you be with VAT legislation.
ready?

How does VAT work?

Sale material
AED1000 + AED50 VAT Factory

Sale product
AED2000 + AED100 VAT

AED50 AED100

AED50 AED100

Supplier Wholesaler
AED150
Government
income AED250

AED250 AED150

Sale product
Sale product AED3000 + AED150 VAT
AED5000 +
AED250 VAT
Retailer
Individual
*The example is calculated using a VAT
rate of 5% on a taxable supply.
VAT implementation roadmap Are you ready?

WHAT SHOULD YOU BE DOING?

PHASE 1: PLAN AND ANALYZE PHASE 2: ASSESS IMPACT PHASE 3: IMPLEMENT (once legislation is published) PHASE 4: GO LIVE
Identify project resources Map supply chain processes and transaction
As soon as Prepare and assist with implementation
April - December Test exceptions
possible 2017
Understand the 'as is' situation flows to VAT requirements Assist with IT VAT solution design Prepare and file VAT returns
Assess the impact of VAT NOW Review legislation and assess impact Assist with IT implementation support Resolve any teething issues From 1 January
Model input tax credit allocations Assist with VAT registration Fine-tune compliance practices 2018
Assess IT impact Provide VAT technical training
Prepare an issues log to help prioritize key issues
that need to be addressed during
implementation
Review sample contracts
Debrief
Help prepare an implementation plan

How can KPMG help? Work products How can KPMG help? Work products How can KPMG help? Work products How can KPMG help? Work products
Project plans Project plans Transaction maps High level impact assessment VAT implementation plan Implementation plan VAT submission VAT submission
Identify key stakeholders Resource plan Map all relevant processes, transaction flows Presentation to senior management Prepare plan User acceptance testing Support throughout submission Assist with - or review - VAT
Finalize and agree communication plan for Roles and responsibility matrix and tax touch points Transaction maps IT testing User acceptance test plan Report on gaps and lessons learned returns prior to submission
staff, suppliers and customers Communications strategy and materials Contract reviews Business process impact requirements and matrix Develop user acceptance test scripts User acceptance test scripts
VAT awareness VAT awareness workshop Review existing contracts to identify the Contract review report Support end user testing User acceptance report
Identify information requirements material impact of VAT Overview of impact and high level resolution plan Review VAT compliance reports Tax reporting and filing test
Legislation review and impact assessments Recommendation of VAT clauses Training and VAT manual Training and VAT manual
Determine tax drivers and functional design Legislation review Prepare training calendar Reviewed training manuals
requirements VAT issues and ambiguities log Review end user training material VAT process maps and manuals What are the benefits of being VAT ready?
Identify VAT decision flags VAT approach recommendations Registration Registration Maximize VAT recovery on business inputs
Identify impact of VAT for senior management Documentation of implementation decision points Advise on registration Registration completion report and review Reduce adverse impacts on cash flow
Provide inputs on VAT's IT impact Tax credit allocation model Advise on applicability of special VAT schemes Ensure compliance with VAT obligations and reporting
Impact assessment model (such as forming a VAT group) Minimize risk of fines, penalties and reputational damage
IT impact assessment report
Solution architecture design
Functional ERP requirements
Impact on customizations
Master data assessment
Reporting requirements
Clare McColl Introducing VAT
Partner, VAT
VAT will impact:

Contact details Procurement and production


cmccoll1@kpmg.com Suppliers pricing
T: +971 4 424 8959 A/P invoice processing time
M: +971 54 307 2459 Purchases from non-registered VAT
businesses
Supplier education

Clare leads our indirect tax practice in the UAE IT


and Oman, having previously led the Scottish System changes
indirect tax practice for KPMG in the UK. She has Documentation (tax invoices)
vast experience in international trade, oil and gas, Reports for VAT returns
real estate, financial services and manufacturing.
With over 25 years experience in indirect taxes,
Clare is a member of the Scottish VAT Sales and marketing
Practitioners Group and sits on the indirect tax Samples/marketing
committee for the Institute of Chartered Pricing strategies
Accountants for Scotland. Returned goods
Education of - and communication
with - consumers
Professional and industry experience Credit items
Before joining KPMG, Clare spent 12 years with
another big four firm, leaving as Head of Indirect Legal
Tax for Scotland and Northern Ireland, having Existing and new contracts
trained initially with the UK tax authority where Payments based on revenue or
she conducted VAT inspections, investigations and turnover (such as franchise or
implemented VAT legal and technical programs. royalty arrangements)
She has led a number of international indirect tax
projects, delivering proactive and reactive advice.
Finance
Clare has considerable breadth and depth of Bad debts
experience and understands the need for speedy, Deposits/advanced payment
reliable and pragmatic advice in addition to Leases and hire purchase
proactive strategic solutions. Loan of stock and equipment
Clare recently worked alongside the UK tax VAT return preparation
authority to help develop policy and legislative Disposal of assets
change around VAT recovery on pensions. She also Sales of scrap
carried out a number of impact assessments for
clients in respect of this new legislation in order to Human resources
ensure that her clients could adopt early where Fringe benefits
doing so would deliver a financial benefit. Gifts to employees
Employees allowance and claims
Contact us
To learn more about how to prepare your organization for VAT, please contact
our local team:

Clare McColl Ashok Hariharan


Partner | VAT Partner | Head of Tax
cmccoll1@kpmg.com ahariharan@kpmg.com
T: +971 4 424 8959 T: +968 2474 9231
M: +971 54 307 2459 M: +968 9932 4874

Robert Dalla Costa Nilesh Ashar


Director | VAT Partner | Tax
rcosta1@kpmg.com nashar@kpmg.com
T: +971 4 424 8932 T: +971 4 424 8987
M: +971 56 415 8738 M: +971 56 683 3219

Ankur Jain Tareq Dreiza


Senior Manager | VAT Partner | Management Consulting
ajain23@kpmg.com tareqdreiza@kpmg.com
T: +971 4 424 8960 T: +971 2 401 4826
M: +971 56 524 1468 M: +971 56 508 5141

Arjun NandaKumar Deepak Chadha


Senior Manager | Tax and VAT Manager | VAT
anandakumar@kpmg.com dchadha1@kpmg.com
T: +971 4 424 8999 T: +971 4 356 9873
M: +971 56 995 7116 M: +971 58 898 2996

The information contained herein is of a general nature and is not intended to address the circumstances
of any particular individual or entity. Although we endeavour to provide accurate and timely information,
there can be no guarantee that such information is accurate as of the date it is received or that it will
continue to be accurate in the future. No one should act on such information without appropriate
professional advice after a thorough examination of the situation.
2016 KPMG Lower Gulf Limited and KPMG LLP, operating in the United Arab Emirates and the Sultanate
of Oman as KPMG, member firms of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (KPMG International), a Swiss entity. All rights reserved. The KPMG name and
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