With the VAT implementation deadline fast approaching in the UAE, businesses are expected to accelerate their process to prepare for VAT. In a country like the UAE where there are no major taxes, there will be challenges that businesses will have to face while implementing VAT. One of the major regional challenges is the lack of VAT experts.
Given that Accounting is a profession that is wide and includes Tax and Audit, the small and medium-sized businesses should not assume that an Auditor has the same skills and knowledge as a tax professional. These are two very different areas within Accounting with different skill sets. For example, one would not ask a pediatrician for advice for treatment on a broken bone which would be better suited for an Orthopedic. Although both are highly skilled doctors, both are specialists in their own right in their given field.
It is possible to find experts in various other Accounting disciplines such as Bookkeeping and Auditing but that does not mean they are tax experts. Taxation on the other hand is a different discipline that demands a unique set of skills and expertise. Businesses should note that Auditors may not be able to serve their purpose when it comes to Taxation. Auditing and Taxation should not be understood as a single discipline.
Auditors are independent specialists whose role is to review and check the financial statements of an organization and then express their opinion on its accuracy and authenticity. They cannot check every single accounting transaction as this would be too time-consuming so they usually base their opinion on materiality. Therefore, their audit opinion would usually be based on the financial statements being materially correct. They also review how the accounting rules are applied to transactions and also review the controls and processes of an organization.
A VAT Tax consultant, on the other hand, would use their knowledge of the tax legislation to provide tax advice for their clients. They would not necessarily have the accounting standards knowledge that an auditor does not have nor would they review the controls and procedures of the organization to prepare a tax return. They would typically be diving deeper into the transactions to understand them better to complete a tax return more accurately.
As mentioned above Auditors are independent specialists, the success of an audit hugely depends upon the independence of the auditors. In other words, if the auditor is biased and has a personal interest in the business of its client then chances are that the opinion of the auditor will be biased. This would lead to one questioning the whole purpose of an audit. It is therefore recommended that the same firm does not provide the Audit and the Tax consultancy. This would help to maintain the integrity and segregation of these two activities and will help an organization to benefit from each of them more efficiently.
When it comes to VAT in UAE, learning the new tax legislation requires time and effort which the audit firms may not be able to allocate adequately since they are already engaged in serving their existing clients. It should also be noted that VAT legislation has some advanced concepts that need careful consideration and expertise while applying to practical scenarios. VAT will impact all areas of the business including sales, purchases, finance, legal, operations, IT, and HR. The process of incorporating VAT into accounting systems and submitting quarterly VAT returns accurately to the Federal Tax Authority means that many organizations will require expert professionals with experience in VAT law and implementation. Insourcing this process would mean hiring a VAT expert or a Project Manager to run this project. Both of whom would be expensive hires, they would need sponsorship for a visa, demand a good benefits package, and also need to be managed. Time would also be needed to find the right candidate including conducting interviews and assessments to ensure they have the relevant skills and experience to be able to deliver the project successfully.
Another reason why companies should use VAT experts as opposed to a DIY solution is that the VAT experts would bring a breath of wealth and experience in helping businesses prepare for VAT. They also keep up to date with the latest VAT developments and pass this information on to their clients. They would also typically be working for numerous clients simultaneously and therefore can share the knowledge and lessons learned during the implementation process between clients (without sharing sensitive information).
A firm which is specialized in the VAT provisions for the UAE would be able to serve the businesses operating in the region better than a firm that is engaged in regular accounting and auditing services. A professional firm like Alpha Pro Partners which specializes in VAT Implementation and Consultation in UAE can be relied on for preparing your business to be VAT compliant at a reasonable cost. It is always recommended for the business to choose a Tax consultant over an Auditor to implement and manage ongoing VAT compliance to ensure VAT readiness and to avoid the unnecessary costs related to non-compliance.