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VAT ADVISORY AND
IMPLEMENTATION
1.B4SH BACBABBA7D
Client and Project Background
Legal Framework for VAT Key
Considerations
LEGAL FRAMEWORK FOR VAT IN THE KSA
GCC
Agreement
(finalized and
published)
VAT Law
(final law
published)
Regulations
VAT Implementation
(final regulations published)
Tax Rulings
(as and when required)
▪ Sets broad principles and some mandatory elements for VAT in GCC
▪ Each state responsible for its own implementation andenforcement
▪ Primary legislation for VAT in KSA which gives effect
to GCC agreement
▪ Sets out implementation and compliance
enforcement framework for VAT
▪ Secondary legislations which provide
additional rules and laws for interpretation of
GCC Agreement and VAT law
3
Manufacturer
(SAR 800 + VAT 40)
Distributor
(SAR 900 + VAT 45)
Retailer
(SAR 1000 + VAT 50)
Consumer
Landed Cost SAR 1050
SAR 40
SAR 45
SAR
50
SAR 5 (SAR 45 –
SAR 40)
SAR 5 (SAR 50 –
SAR 45)
SAR 40
Value Added Tax (VAT) Model
Vat Impact in KSA
Sales Price VAT @ 5% VAT Credit
Tax to the
Government
Manufacturer
to Wholesaler Net Taxable Price 10000.00 500.00 500.00
Wholesaler to
Retailer
Net Taxable Price 110% 11000.00 550.00 500.00 50.00
Retailer to
Consumer
Dealer Net Taxable Price 110% 12100.00 605.00 550.00 55.00
Total 1655.00 1050 605
Chapter two – Registration Who has to register? or eligible to register in the Kingdom Saudi Arabia
Chapter 2 – Article 2 Taxable person is a person Who does economic activity independently Who generates
income
Registered under VAT Or who is required to
register under VAT
Chapter 2 – Article 3
Read with article 50
of GCC agreement
Mandatory registration When Supplies exceed Registration Threshold
limit of total supplies of 375000 SAR OR
about to cross.
Person has to calculate
supplies every month
plus till past 11
months(for 12
months)
Apply immediately
when about to cross
Threshold limit
To apply with in 30days
It will be applicable from
next month when cross limit
Chapter 2 – Article 4
Read with article 50
of GCC agreement
Mandatory registration Estimated expected future supplies of 375000
SAR
Or to estimate
supplies of future 12
months
Apply immediately
when about to cross
Threshold limit
To apply with in 30days
It will be applicable from
first month expected
Chapter 2 – Article 5 Mandatory registration for
Non-Residents
To pay TAX From First supply made Or
received in KSA
From 1 inward Or
outward supply in KSA
Apply immediately To apply with in 30days
of the first supply .
Applicable from 1 day
Chapter 2 – Article 6
Read with article 12
Mandatory registration
Other provisions
When person has failed to make application TAX authority can
register immediately
With out application Next month when crosses
limit OR about to crosses .
Later or Earlier date may be
allowed.
Chapter 2 – Article 7
Read with article 51
of GCC agreement
Voluntary registration Estimated expected future 12 months supplies
or expenses of 187500 SAR (50% of mandatory
threshold)
Or When Supplies for previous twelve months
exceed voluntary Registration Threshold
Application before or
after crossing
Threshold limit
May be registered for earlier
or future date
Registration application has to contain the following minimum information: ( Chapter 2 - Article 8 ) 1. Official name of the legal Person Or if Neutral person then Name with ID info.2. Address of Office & business place 3. E-mail address & Contact mobile number 4. Electronic identification number if available - In KSA ID documents are mandatory for all citizens aged 15 and over. 5. Commercial registration number if any - Detailed information about organization performing commercial activity 6. Value of Annual supplies Or expenditures of last year ( Jan to Dec)7. Effective Or any other alternative requested date of registration
8. Any other info required by Tax authorities to be given with in 20 days if asked for .
Chapter 2 – Article 9 -Specific provisions for Registration
Exclusive ZERO rated
supplies
Are exempted form
Registrations
But can be registered
voluntarily
Related persons 2 Or more If carry on similar or related
economic activities
Annual Supplies be added within a
specified
duration, and combined figure be used
as each Person’s annual Supplies value.
NR person itself Or its tax
representative get approved
Change in tax representative as per
article 77 is to be notified with in
20 days
Chapter 2 – Article 8 DOCs required to register next page
• Standard Rate5%
Input Tax Deductible
• GOVT Or activities of Government and Public authorities (article 9)
• Employer , Employed or contracted persons where there is relation of employer & employees with remuneration (article 9)
• Transfer in the same entity or group entity (article 18)
• Issue or Supply of Voucher (article 19)
Out of Scope (Entities + Type of Transactions +
Supplies)
• Finance Services including Life Insurance (Article 29)
• Lease or license of Residential Real Estate (Article 30)Exempt
Non Deductible
• Exports of Goods from KSA (Article 32)
• Services Provided to Non-GCC Residents (Article 33)
• Transportation services for Goods or passengers outside the Kingdom and Supplies relating to transportation (Article 34)
• Medicines and medical equipment (Article 35)
0%
Input Tax Deductible
Rates and Input Credit mechanism
In Kingdom of Saudi Arabia Chapter Article 5% ZERO Exempted Out of VAT
Supply of medicine & medical equipments
Qualifying Medicines / Medical Goods by Health committee
6 31 –0 rate/ 35 ZERO
MDMA Listed
SFDA Listed
Private Health Care 5% ZERO
MDMA Listed
SFDA Listed
Internal (intra - GCC) / international Transportation 6 31 –0 rate/ 34 ZERO
Domestic Transportation in KSA - recreation or private use 5%
Private Education 5%
Commercial Real Estate 5%
Supply / Sale residential of Real Estate 5% Supply to own or close relative use
Rent residential of Real Estate 5 30 Exempted Use by own or close relative
Supplies of investment in gold, silver, and platinum 6 31 – 0 rate /
36
ZERO
Export out side GCC – Includes Services financial services. To
export with in 90 days. Docs evidences - Customs /commercial
invoice / Docs of place of Delivery & transportation
6 31 – 0 rate /
32
For goods
/33 For
Services
ZERO
Basic Food Items 5%
Oil , Oil derivatives & GAS 5%
Domestic Financial Services- Explicit Fess – Goodwill Or
Commission or commercial discount
5%
Life insurance , Capital Market Activity , Margin 5 29 Exempted
Upto SAR 40MM Above SAR 40MM
VAT Periodical Compliance
Filing frequency: Quarterly
First filing period: Jan – Mar 2018
First filing deadline: 30-April 2018
Filing frequency: Monthly
First filing period: Jan 2018
First filing deadline: 28-Feb 2018
2. SCOPE OF WORK
Scope of Work
Roadmap & Envisaged Approach
Deliverables and Timelines
SCOPE OF WORK
12
Objective
To assist the Client by providing VAT advisory and implementation support. Saudi Arabia is shifting to a VAT regime form 1st January 2018
and all companies doing business in the Kingdom need to register for VAT by 20th December 2017 and start complying with VAT with effect
from 1st January 2018 .
Scope
▪ VAT Impact Analysis
Overall VAT Implications on company – Pricing, Costing, Profitability and Cashflow
VAT implications – Purchase side
VAT implications – Sales side
▪ VAT Implementation
Assistance in VAT Registration
Identifying Items on which VAT is applicable/ not applicable
Change required in accounting practices forVAT
General information required to capture forVAT filing
Invoice and other templates incorporating VAT and related information required for VAT filing
▪ Post Implementation Support
Filing support for 3 cycles of VAT filing to ensure that the Client achieves self-competence
ROADMAP FOR VAT IMPLEMENTATION
Action plan
PHASE-1
ImpactAnalysis
PHASE-2
Implementation
PHASE-3
▪ “As is” Study
▪ Suggesting Tax Optimization
Scenarios
▪ Drawing Change Management
Roadmap
▪ Impact in costing / pricing / cashflow
due to VAT
▪ Objective decision making for
optimizing the tax impact
▪ Approved implementation roadmap
▪ Registrations
▪ Policy and SOPs
▪ TeamTraining
▪ System Integration support
Post Implementation
Support
▪ Day to day queries
▪ Handholding team through 3 monthly
cycles of VAT filing from an offshore
basis
Ac
tivit
yK
ey
Ou
tco
me
▪ Clear operating guideline
▪ Team sensitization
▪ ERP requirement mapping
▪ ERP UserAcceptance
Testing (UAT)
▪ ComplianceAssurance
▪ Online issue resolution
13
▪ System related feedback
generation
ENVISAGED APPROACH
Phase 1- ImpactAnalysis
Key goals under impact analysis is to assess the impact of VAT on product costing/ pricing/ cashflows and developing alternatives for optimizing tax outflows.
Key activities during this phase include:
▪ Collection of information related to product categories, delivery structures, contracts, classifications, etc.
▪ “As is” study to assess the impact of VAT on product costing/ pricing/ cashflows/ tax outgo, etc.
▪ Developing alternatives for optimizing tax outgo through change in delivery structures, change in contractual understanding, change in transaction
structures, etc.
▪ Discussions with management on findings of the “As is” study and the alternatives assessedabove
▪ Preparation of implementation roadmap based on findings and discussions with the management
Phase 2- VAT Implementation
14
Major goals under this phase include providing assistance in VAT registration, Policy and SOPs, Team Training and System Integration support. Key
activities during the this phase include:
▪ Advising on the requirements for VAT registration and assisting the Client in the registration process
▪ Catalyze the decisions about managing credit from VAT for smooth transition, transaction models, teamrejigs, system rejig, budgets, etc.
▪ Catalyze approval of the change management roadmap
▪ Roll out the trainings to the core team with regards to VAT and relevant process changes
ENVISAGED APPROACH (CONTD…)
Phase 2- VAT Implementation (Contd…)
▪ Provide templates, vendor education, training and outreach for smooth flow of input taxcredits
▪ Design the relevant templates from gate pass to invoice, updateSOPs
▪ Coordinate with the ERP vendors or the support partner for rolling out the process levelchanges
▪ Creating a clear requirement and project manage the changes in the systemsparameters
▪ Doing User Acceptance Testing from VAT perspective
▪ Handholding implementation of determination tool in cases where there are multiple systems and wherein the auto logic is not working in the current
system
Phase 3- Post Implementation Support
15
The envisaged goal under this phase is to handhold the team through 3 monthly cycle of VAT filing so that they achieve self-competence on the same.
Key activities under this phase include:
▪ Train the in-house team on VAT filing requirements
▪ Handhold the team through three cycles of VAT filing
▪ Review the errors and mismatch possible
▪ Suggest further changes in various aspects like systems, vendor relations, processes (if any)
DELIVERABLES AND TIMELINES
With regard to the above deliverables and timelines, please note that following:
▪ The timeframe indicated for the submission of deliverables factors in prompt receipt of information from the Client, provision of inputs in a timely manner and quick turnaround
of queries/ interim draft deliverables. Delays at the Client’s end on any of these aspects could lead to the timelines getting stretched.
▪ Client’s support may be required for securing visas for the VAT Consultant team members undertaking field visit to Saudi Arabia. Any inordinate delay in securing visas could
impact the execution timeframe indicated above.
Deliverables
The key deliverables for the various phases are summarized below:
▪ Impact analysis report
▪ Templates for Invoices and related SOPs
▪ Training material
The deliverables will be submitted in electronic format and all deliverables will be in English language only.
Timelines
The VAT advisory/ implementation shall take around 8 weeks across the project time-frame. Our initial estimate of timelines for various stages is depicted below. Please note
that the timelines provided are not contiguous but would be spread across the overall project time-frame leading up to the company registering for VAT and filing 3 monthly
returns
16
Activity Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7 Week 8
Impact Analysis
VAT Implementation
Post Implementation Support
▪ The scope of services is limited to providing VAT advisory and implementation support to the Client as detailed in the scope of work. Technical coding and mapping of the
changes in the ERP system doesn’t form part of the scope of the assignment. However, the VAT Consultant shall coordinate with the ERP vendor/ partner/ internal IT team
for rolling out the process level changes in ERP and the UAT testing.
▪ Software licensing costs for any kind of software required to be used in the process of impact analysis, invoicing, determination, implementation, compliance, etc. is not
included in the professional fee for this engagement. The same (if required) would need to be purchased by the Client. Furthermore, providing hardware and networking
support doesn’t form part of the scope of services for this engagement.
▪ It is understood and assumed that there is centralized accounting system and all the accounting information will be available centrally from Head office/Corporate office for all
the relevant periods. Furthermore, all accounting records/ agreements/ contracts will be made available in English Language.
▪ All communication and trainings will be in English language. In case of any translators are required for communication with core team the same will be arranged by the
Client. Furthermore, the trainings will be provided at a centralized location.
▪ Timely execution of the project assumes prompt receipt of information from the Client and availability/ access to relevant executives for discussion. The VAT Consultant
further assumes that the Client would nominate a coordinator to ensure access to and smooth flow of information as well as to undertake the required internal co-ordination
to ensure availability of relevant executives for discussions.
▪ The VAT Consultant shall rely on the information and explanations given during the course of execution of the assignment and shall not be responsible for implications of any
incorrect, erroneous, or delayed information. The VAT Consultant reserves the right to amend its observations, workings and conclusions after any new/ rectified information
is made available.
17
SCOPE ASSUMPTIONS AND EXCLUSIONS
Tax &
Finance
18
IT
Systems
Human
Capital
Sales &
Marketing
Supply
Chain
VAT
Impact
Areas
▪ Assess costing
▪ Re-design Processes
Plan for transition to new law Plan for the
change in cashflow Design compliance
calendars
▪ Complete registration formalities
▪
▪
▪
▪ Add relevant tax clauses in relevant
agreements
▪ Validate critical documentation and formats
▪ Update VAT data in vendor / customer
masters
▪ Update Inventory masters with
tax class and rates
▪ Develop document formats for
Invoices / debit note / credit notes
▪ Design relevant statutory
reports for VAT filing and record
keeping
▪ Re-skill / recruit / outsource
▪ Assess and change the division of
responsibility with respect to VAT
▪ Collect Customer VAT
Data
▪ Restructure at existing
contracts
KEY CONSIDERATIONS FOR VAT
IMPLEMENTATION
VAT Team
Engagement Leadership
Technical
Partners
High level Technical
Leadership
Project
Team
Understand, IT support and Project
Management
Technical
Team
Domain support
Compliance
Team
Registration and Filing
Support
PROJECT TEAM
19
In-depth GST implementation experience for
India
Committed point of contact for
each client relationship
Full-fledged IT implementation
Team
Trained Offshore Compliance Team
Specialized Tax Content Team
Thoughtful and
Experienced Ecosystem
Tax Firm
Since 1985
Why APMH?
Family
Owned
VC / PE
Funded
Multi-
Nationals
Startups Small and Medium Large
Trading and Distribution Manufacturing andAncillaries
Banking Logistics Construction and Real-estate
SAAS Engineering Hospitality Broking e-commerce
CLIENTELE SPREAD ACROSS VARIETY OF
SECTORS & OWNERSHIP STRUCTURES…..
21
CA Mitesh Katira
Partner
APMH
Profile Brief
Mitesh is a Chartered Accountant and a ISA qualified
with specialisation lies in Business Advisory Services
with more than 15 years of experience. Mitesh has
been focusing on Internal Compliance
Outsourcing and
Audits,
GST
implementation. He has been helping corporate and
Multinationals on GST
Impact Analysis, Implementation and Compliance.
Mitesh has been convenor for Information Technology
Committee of the CTC i.e., Chamber of Tax
Consultants. He is also a part of IT committee of the
WIRC of ICAI. Mitesh
of thehas also been a Convenor
Ghatkopar C A CPE Study Circle.
Specializations
▪ VAT Implementation
▪ VAT Transaction advisory
▪ VAT compliance outsourcing
▪ Corporate Training
▪ Process Implementation
Education and Certifications
▪ Chartered Accountant
▪ DISA - ICAI
▪ FAFP – ICAI
▪ Certified trainer india GST by ICAI
Deepak Pasad
Senior Manager
APMH
Profile Brief
Deepak has more than 15 years of experience in the field
of tax consulting and compliance. Deepak has been
handling complex consulting matters with regards to
VAT, Service Tax and now GST for India.
He has been learning, understanding and writing on the
VAT implementation in the GCC region, mainly Saudi
Arabia and UAE.
Apart from tax, Deepak has deep understanding about
the tax technology and tax processes. He has been
advising clients with the detailed master, format,
process and reporting changes in the ERP to maintain
and extract reports from the ERPs like Tally, SAP,
Bhalcon, etc.
Specializations
▪ VAT consulting
▪ VAT opinions
▪ IT implementation for VAT
▪ Corporate Training
Education and Certifications
▪ Chartered Accountant
▪ DISA – ICAI
▪ IT system advisory VAT
Madhav Wagle Senior
Consultant APMH
Profile Brief
Madhav is senior GST consultant.
Madhav has been handling clients with
complex business models
compliance management. experience
in the indirect
in GST
His vast
tax while
working for 37 years in Color Chem which is now known
as Clarinet mainly in excise, SCM and SAP is
coming handy for
consulting on the GST matters. Madhav has been
handling corporate clients in and around Roha MIDC as
well as Mumbai, with respect to GST consulting and
compliance from APMH Roha office. Madhav has been
studying and developing content for consulting VAT for
corporates and multinationals in GCC region, mainly
Saudi Arabia and UAE.
Specializations
▪ IT system advisory VAT
▪ VAT compliance management
▪ VAT process designing
22
23
E-Mail : mitesh@apmh.in
Mob : +91 9833777556Web : www.apmh.in
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