Whilst the objective may be always to get things right, it is sometimes easier said than done. The risk of errors cannot be removed completely, and many different factors such as time pressures, staff shortages and difficult trading conditions can mean that sometimes, the tax does not get as much attention as it should. However, some basic building blocks can help reduce the risk of errors and non-compliance.
Firstly, it is essential that the business maintain the correct VAT records, including copies of all supporting documents such as tax invoices. The record-keeping requirements are slightly different for each of the GCC countries that have implemented VAT, but all the countries have published detailed guidance, so it’s easy for the taxpayer to find the information they need if they are not sure what is required.
Secondly, the taxpayer needs to build a process for extracting and collating the information required for the VAT return and for making the payment to the tax authority. As with record-keeping, the payment deadlines and the information needed for the returns are slightly different for each country, but again, the information on what is required is available from the tax authorities.
The compliance process will vary from business to business, but in all cases, it needs to be clear, it should be followed in the same way for each return, and it should include some controls to ensure that all the information is collected from the records. These controls should include a review or sign-off from an appropriate person. Later in this article, we go into more detail on the sort of areas that should be addressed by the checks and controls in the compliance process.
The final building block for effective VAT compliance is a question of the people involved. It is important that the responsibility is given to the right person, that they understand what they need to do, what the deadlines are, and what the consequences are of not complying. This seems a simple point, but often we see the job given to a junior member of the finance team, who has not had sufficient training. Alternatively, the role may be taken on by a senior member of the team who may not be close enough to the day-to-day transactions or may simply have too many other responsibilities. In either case, problems are likely to occur if the compliance is in the wrong hands. It’s important, therefore, that the business considers the needs of the VAT compliance role, that it identifies the right person (or people), and that they receive the training and support they need.