A well planned and executed VAT implementation will result in benefits for the business in respect of ongoing compliance and management of risks, as well as, cash flow management.
What is VAT?
VAT is an indirect tax applied to the consumption of most goods and services. VAT is levied by VAT registered businesses which make supplies of goods and services in the course or furtherance of their business. VAT will also apply to the importation of goods. VAT is levied at each stage in the supply chain and is collected by companies on behalf of the Government. VAT is ultimately incurred and paid by the end consumer. Although VAT will apply to most goods and services there are some likely exceptions: this includes basic food items, essential medicines and exports of goods and international services which are expected to be zero rated supplies. Furthermore other supplies such as healthcare, education, sale or lease of residential property and finance and insurance are expected to be exempt from VAT.
How does VAT work?
VAT registered businesses charge and add VAT to the value of goods and services they supply. Such businesses can also reclaim VAT incurred on goods and services acquired for business purposes (subject to some restrictions) such as the purchase of raw materials and other consumables used for business. For imports, VAT is charged at the first point of entry into home consumption (when customs duty may also apply). Please refer to the illustration for ease of understanding
Frequently asked questions on VAT implementation
Why do I need to start preparing now since the legislation is yet to be issued?
The expected date for VAT implementation is 1st January 2018. Given your business’ complexity and volume of business transactions, it could take you a substantial amount of time to evaluate and map your business operations. This is a critical step in your implementation project, and it is something that can be started before the legislation. Also, reviewing existing systems would help you anticipate the size of the changes and efforts required.
What if I decided not to change anything?
If nothing is done, there is a grave risk that your current business methodology will not be compliant with the new legislation. Furthermore, you might not be able to submit a complete and accurate VAT return promptly. Non-compliance could lead to penalties or prosecution, whichever applies.
How can Strategic Axis help?
Strategic Axis can provide a complete range of services to address all elements of VAT implementation and ongoing compliance.