Intelligent Tech Channels Issue 17 | Page 49

EDITOR’S QUESTION Using codes to streamline VAT submissions Using the right tax codes are important for automated submission of VAT returns explains Ali Hyder at Focus Softnet. N ow that VAT has been introduced in the UAE and Saudi Arabia, what are the best practices that have been embedded in your products and solutions? V alue Added Tax is a tax on the use or consumption of goods charged at the time of point of sales, and was introduced into the UAE and Saudi Arabia on January 1st, 2018. While end users general bear the cost of VAT, registered businesses collect and account for the tax, almost acting as a tax collector on behalf of the Federal Tax Authority. The Federal Tax Authority requirements state that tax systems must accurately capture and produce relevant accounting information for tax reporting through leveraging company information, purchase, sales and GL data tables. It must also help to automate business processes in maintaining a record of taxes, decreasing the error in tax declaration, and thus, reduce the compliance costs and penalties issued to the business. In addition, the software should allow the automation of all tax-based responsibilities, keeping track of records, payments and file returns in order to save the business time and money. Accounting software should also automatically generate FTA aligned audit files, VAT return files, tax invoices and debit and credit notes. The software should then be able to upload VAT return files on the FTA’s portal on predefined schedules. The Focus tax accounting system aims to encourage minimum user intervention in data input, and instead focuses more on process automation to avoid human errors. The tax code and applicable tax percentage is determined by following pre- programmed parameters: Ÿ Ÿ If your company has multiple TRN and multiple jurisdictions, Focus picks the jurisdiction from the financial tag which you would maintain for separate company data. Ÿ Ÿ Tax category of the product or service, such as viz standard rate, zero rated or exempt Ÿ Ÿ Place of supply where goods or services are being delivered. Ÿ Ÿ The system will then automatically pick the relevant tax codes, such as like SR, ZR, EX, OS, RC, IC, based on the above combinations. Out of the transaction data entered, the relevant tax and accounting data is captured in a number of ways. The data entered in all invoices or advance receipts will be populated by the Emirate’s standard rated supplies provided the tax code given in the document is SR. The supplies subject to reverse charge mechanism RCM are identified based on all purchases that have been given the tax code RC, and where GL posting has been affected to both input and output accounts. Ali Hyder, Group CEO Focus Softnet. All sales with the tax code ZR are categorised under zero rated supplies, and all taxable products and services, which come under exempt categories are flagged with tax code as EX. VAT paid on purchases and related debits which have attracted VAT can be deducted from the VAT payable, provided all such entries have been given the SR- REC tax code. Once the entries are completed with the given tax codes, the Focus system will then automatically populate the submission report, making it easier for users to directly submit the values or upload the submission report using the upload functionality on the FTA website.  49