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Why Businesses should get ready for VAT?

 By Saleem uddin Faisal, Founder & CEO of DanOwa, Oct 2019

1

Introduction

VAT is indirect taxation, ultimately beard by the consumers and the businesses just work as collection agents from each organization in the whole supply chain, the govt. devised the mechanism of VAT by making the framework and regulations with online portal for VAT filing etc. VAT is based on Revenue or Sales, the minimum amount is US$100,000/- (BHD 37,500/-), this is mandatory threshold for registration for any type and size of organizations, the exception may be some industries and depends on the framework for each GCC country, like KSA and UAE have no exceptions, however health care, oil and gas, basic education as well as some food items etc. are exempt from the VAT in BAH, all GCC countries must apply VAT as signed unified agreement in 2018, sooner or later all countries must apply in their respective countries.

2

Businesses to upgrade

Business dynamics and dimensions are moving very swiftly those organizations who don't have appropriate systems such as Enterprise Resource Planning (ERP) falls not only behind, they even create a Grey Area for the Govt. Agencies in terms of transparency and accountability, since Value Added Tax (VAT) has already been started in GCC (KSA, UAE and now BAH from 2019), it's high time that organizations structures need to be accessed, gone are those days when the business owners or managers deliberate DON'T WANT, their businesses to be monitored or checked, with the inclusion of VAT in GCC, NO businesses should be handled without having proper books of accounts, if the targets of govt. need to be achieved for meeting the budgets etc, there need to be a TOP DOWN approach.

3

What, Why, How and When VAT?

Value Added Tax (VAT) is an indirect tax, applied on each supply chain and to be paid ultimately by the consumers on Goods/Services.           Businesses are collecting and ultimately liable to pay the government.

VAT is a form of revenue to be received by the government and utilized on the public services such as roads, education, health-care and other infrastructure of the country.

Business need to adopt systems which can record and report VAT on timely basis thus enabling govt. to speedup the collection & filling process in case of Bahrain, National Bureau of Revenue (NBR). Systems can be in form of an Accounting Solution or ERP ensuring are compatible with VAT compliance. 

Any type or size of the organization having revenue or turnover in BHD.
A) 5,000,000 or above Dec 2018.
B) 500,000 or above June 2019.
C) 37,500 or above Dec 2019.
D)18,750 minimum can register anytime.

Note: Starting from 2020, any business BHD 3,000,000 need to submit monthly VAT returns.

4

Penalties

There are various penalties for non-compliance that may be due to lack of knowledge (unintentional) or deliberate (intentional), leads to imprisonment (up to 3 years) for tax evasion, financial penalties are BHD 5,000/-, 10,000/- or percentage of revenue, subject to NBR.

5

What's next?

Businesses generating BHD 37,500/- Annual Sales/Revenue, or more, should register to get VAT Certificate (TRN) by Dec 20th, 2019. Also if you are having BHD 18,750/- Annual Sales, can register anytime. Please contact 36683371 or dovat@danowagroup.com

VAT and ERP

 By Saleem uddin Faisal, Founder & CEO of DanOwa, Nov 2019

1

Introduction

Since VAT already started in Bahrain as applied by National Bureau of Revenue (NBR) as a result of executive regulations on Value Added Tax (VAT), an indirect tax to be paid ultimately by the end-users, businesses are collecting and ultimately liable to pay the government. plus businesses should be prepared to manage and maintain records of the entire business finance, operations etc.

2

Which type and size are subject to VAT?

Any type of business whether dealing in Goods or Services are subject to VAT, the criteria is the threshold of revenue which is BD 37,500/- (USD 100,000/-) MUST be registered by 20th Dec, 2019. Any business falling under the sales below BHD 499,999/- upto BHD 37,500/- are mandatory to be registered and obtained Tax Registration Number (TRN). Any business below BHD 37,500/- upto BHD 18,750/- (USD 50,000/-) can register anytime and called Voluntarily Registration.

3

Preparation for VAT

Since businesses as per above criteria are subject to VAT, the question may raise how to manage and prepare for VAT, the answer is the adaptation of System in form of an Accounting or complete ERP, it's very important to note that not all the solutions are VAT compliant, means an organization may already have a system, whether they should continue to use or change is subject to features and options compatibility, this can be checked by the in-house team or by hiring a consulting firm.

If the systems can be modified according to NBR regulations, it's fine, if NOT an organization MUST immediately look for other options. Any organizations using Excelsheets or Manual records will be in deep trouble as 5 years records are required to be maintained after VAT implementation.

4

ERP solutions

It's advisable to use an international solution, the reason is the support and continues development by the team of the developers, it's also important to note that an Accounting Solution may not be enough, if they don't have all the required models such as finance, procurement, fixed assets and employee management.

An Enterprise Resource Program (ERP), is a comprehensive solution which can cover an entire operation and finance of an organization, along with reporting requirements for the company itself and the VAT reporting.

An interesting thing, organizations having solutions such Quickbooks, Peachtree (Sage) are not VAT compliant since all USA based products having Sales Tax not Value Added Tax, just by renaming the Taxation doesn't fulfil the requirements, moreover solutions such as TallyERP and similar unfortunately doesn't have VAT on Advance Payments received which are as per NBR subject to VAT and should be take as Taxable Point irrespective whether an invoice will be issued later. Further system that can have digitial documentations and attachments will take off the headache of filling and storing 5 years records.

5

What DanOwa can do for the businesses?

An experienced and expert advisory team can handle your organization requirements whether VAT or ERP, we don't just look into one side of the picture, providing useful business assessment for your company. Also we fully 1st understand the nature and requirements of an organization than only recommend the solution considering the budgetary constraints, if any. Keeping insight on Accounting Standards and dynamic business requirements, we advice and suggest an ideal solution that can fits your businesses.

Contact now consult@danowagroup.com and book an appointment.