VAT is one thing that is trending in UAE’s business world. Everywhere one goes one is curious about the implementation, effect and usage of VAT on businesses and consumers alike. Given that this is a new concept to have touched the business world here it is but natural that a curiosity would sustain till people get more used to it.
Taxation is not a new term for the world but the UAE has been away from the world of taxation unless of course VAT happened. VAT is basically Value Added Tax. It is a form of indirect tax. Unlike income tax, VAT is added on a product or service at the production and the final stage.
The UAE provides a business platform that is teeming with SMEs huge corporations and many diverse form of businesses. The cosmopolitan culture and the global way of life allows for many diverse businesses to flourish and thrive. With the new implementation of VAT in business all these companies are sure to be shaken from their roots. Some adjust well, while some others struggle to cope. The big organisations can still outsource the whole implementation mechanism of VAT if they have an unsure moment. It is the small, hopeful businesses that need to be very careful about the steps that they might take. VAT in itself comes with a lot of added expenditure. It is important that small businesses start their relation with VAT the correct way.
For those SMEs who are still struggling to streamline their business with the new taxation policy there are some guidelines that can help them prepare for VAT this year.
- Planning and Early Assessment:
The implementation of VAT requires SMEs to make changes in their major operations like financial management, Book keeping, technology, etc. Before delving in to bring in the changes, it is important that SMEs understand about what changes suit their business structure, what would work best for them with the help of professional advisors. Once this is clear an SME can then move on to the real action. It is necessary that SMEs build a strong knowledge base and familiarity with VAT early on in this year. The legislation of VAT is already issued and SMEs should do everything to align their business to the new government reporting and compliance requirements.
VAT has naturally made book keeping one of the cardinal tasks in businesses today. The best way to deal with it is to keep all the financial records clear. It is clear that SMEs that need to register for VAT should maintain their accounts well. However, SMEs who do not need to register for VAT should also dust their book keeping files and keep their financial records maintained to showcase the government if ever the need arises.
- Training Programs:
Once the nitty-gritty of VAT implementation are handled at the organisational level it is time to include training programs in an organisation. VAT is a relatively new concept for people in UAE and it is important that everyone in a business understand the concept. Starting from staff to suppliers everyone should be able to understand how it works at their stage if ever a need arises for an explanation. Every staff member and supplier also need to maintain proper book keeping. They need to make sure that goods and services have their VAT marked up. This also needs to be followed by the correct documentation. A little mistake here can create chaos in the larger whole. It is important that SMEs take the importance of training their employee and staff about VAT seriously.
It’s high time that the VAT implementation is in place. Apart from the basic guidelines here are some tips that can help struggling SMEs to manage VAT easily.
- Rework the complete price strategy of an organisation.
- Start a systematic price optimization process
- Classify products by the amount of competition, price elasticity, marginal return and growth potential.
- Review Price optimization factors for all the products and services.
- Impact Simulations and price fine tuning and communication.
- Explore the world of bundling and modified stock keeping.
- Be open to Innovative thinking
- There are many contracts that refer to net prices. These would not change. Try to prevent price decreasing.
- In case of suppliers and contractors, they should be prepared with price adjustment strategies so that there is less pressure with their trade partners for negotiation.
- Keep the sales team of a company up-to-date with the developments of VAT implementation by holding training sessions, explaining statements and Q&A sessions. A well informed sales team is sure to make the transition smooth for a business.
- Incorporate the new price strategy that incorporates VAT as soon as possible so that a business can demonstrate price consistency early and create a positive business image.
It is possible that with the implementation of VAT businesses in UAE will have better facilities to thrive. It is only when the government is doing well that its businesses can prosper. The initial stages of VAT implementation is really confusing. It is important that one understand the process and implement changes step by step. For those companies who are still waiting to implement it is important that they accelerate the process so that they are not lagging behind. Being in sync with the VAT implementation will only benefit a business. If we take a closer look it is actually the consumer and not the business who need to carry the burden of VAT. The changes might seem overwhelming in the present, but once everything is in place, businesses will surely have a smooth time. Moreover, it would also ensure that the future of businesses in UAE are aligned to prosper in a whole different way. VAT would naturally bring in better infrastructure and opportunity for businesses in UAE. VAT is after all implemented so that the government can provide its citizens better. Go with the flow and rest assured your SME will do great.