Brand View: Keep impeccable VAT records by determining the correct place, time, and value of supply.
Business finance doesn't have to be difficult to figure out, but you've probably noticed that it often is. For instance, let's say you own a business in Dubai.
But you're not in the office right now — you're on a vacation with your family. You're waiting in the airport lounge when you receive a call from your assistant confirming a shipment of goods from Saudi Arabia.
Your assistant checks your sales order list and informs you that these goods should be delivered to your customer in India. Sounds easy, right? You ask your assistant to issue an invoice, but they seem confused about the process. "Should the supplier issue an invoice for the customer, or should I?"
You're supposed to board the plane in ten minutes, and you wonder if business finances could be a little more easy to understand. It can, especially when Zoho Books comes into play. You can record the place of supply for business transactions, and manage the time of supply and the value of supply spontaneously.
A supply has taken place when there is a transaction between two people, out of whom at least one is a registered taxpayer. This includes buying goods to sell them, outsourcing services, and importing and exporting goods or services. Activities like purchasing, selling, and stock transfers are considered supplies even if there is no exchange of money.
There are three components of supply. It's important for a business owner to understand all of them in order to claim their input VAT correctly and file their returns without errors.
The place of supply for a transaction is the location where the transaction is said to have occurred. We determine the place of supply for a transaction in order to differentiate between domestic, intra-GCC, and non-GCC business transactions.
Place of supply is determined differently for goods and services. For goods, the place of supply is the location of the goods when the supply takes place, though there are exceptions in the case of cross-border supplies, supplies of water and energy, and real estate. For services, the place of supply is where the supplier is established. Again, exceptions include cross-border supplies and electronic services.
If you're handling business transactions outside the UAE, Zoho Books provides VAT treatments to divide your suppliers and customers into VAT registered, non-VAT registered and non-GCC entities. To start, simply enable the International Trade option while creating an organization in Zoho Books. But how will this help in recording the place of supply for a transaction?
When you issue an invoice or a bill, the contact details of your customer or supplier will be fetched automatically. Based on the VAT treatment assigned to the contact person, the place of supply can be chosen.
Zoho Books supports merchant trading (also called out-of-scope supply). This term describes any transaction where goods are imported from an overseas supplier and sold to an overseas buyer.
Business owners with multiple branches or warehouses can make use of the Reporting Tag feature in Zoho Books to see the data for each location separately. For instance, if you have five warehouses, and you want to track the business transactions specific to your warehouse in Dubai, then you can create a reporting tag for Dubai.
The value of supply is the amount collected by the supplier for providing the goods or services. This includes the price of the goods or services, as well as any charges (such as shipping and handling).
There's a simple formula for understanding the value of supply. You just need to know the amount of the consideration (the monetary or non-monetary payment made by the buyer) and the amount of VAT involved.
Consideration - VAT = Value of supply
Zoho Books supports the FTA's specifications for documents like invoices, bills, credit and debit notes by including the tax rate, payable tax amount and gross value. If the reverse charge mechanism is used, this fact is explicitly mentioned on the document.
If you need to record payments that didn't come in through your banking system (for instance, when the customer pays you in cash), you can add them manually.
If you have receipts that need to be added manually, you can either upload them via email or just drag and drop an image of the receipt. Zoho Books will capture the necessary data from the image automatically.
According to FTA guidelines, if the value of supply is expressed in a foreign currency, it should be converted to AED based on the current exchange rate. Zoho Books has a feature to make the conversion automatically, which comes in handy for businesses involved in cross-border transactions.
The last component of supply is the date of supply (also called the time of supply). The date of supply for a transaction is the date on which taxes are levied on the goods or services that are supplied.
Generally, tax is levied on the earliest of the following dates: the date on which the buyer receives the items, the date on which the VAT invoice is issued, or the date on which the supplier receives full or partial payment for the items.
To use the date of payment as the date of supply, the invoice doesn't need to have been paid in full. Zoho Books allows you to mark an invoice as either partially paid or completely paid so you can keep track of both the date of supply and your customers' outstanding payments.
For subscription-based businesses, Zoho Books offers the option to send out recurring invoices to customers on a regular basis. Automating your invoicing is a great way to save time that you'd otherwise spend sending out manual invoices. You can even pay your bills (such as electricity or internet bills) the same way.
Filing returns for the first time might be a little tedious, but not if you have the right tools. With Zoho Books, you can reconcile your transactions and file your VAT returns directly from your accounting software. The VAT Return Summary generated in Zoho Books automatically fetches all of the data for your sales and purchase transactions, along with your claimable input credit.
Try Zoho Books today, and see how you can create and navigate through business transactions, manage your finances, and file your VAT returns in a few clicks. And the best part? It’s 100% VAT- compliant!
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