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Top 25 Vat Accounting Software

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Table of Contents

What is VAT software?

VAT - a governmental sales tax is now widely used in many countries across the globe and business organizations need to follow its rules and regulations. VAT software is an extremely efficient system that can help companies manage all their tax compliance requirements in an automated manner without the help of an accountant. A VAT accounting software is specifically designed keeping in mind the VAT taxation requirements of the country where the company is located and handles all essential activities such as  sales orders, tax returns customer invoices, receipts, and vouchers

Why are GCC states implementing VAT?

The GCC countries have jointly agreed to change their traditional taxation system and follow the new VAT in GCC regulatory framework. A comprehensive framework agreement has been signed by each of the six GCC countries: Bahrain, United Arab Emirates, Oman, Qatar, Kuwait and Saudi Arabia which will clearly state the underlying principles of the new VAT laws. These GCC countries have been obliged to adopt the new VAT to harness more reliable and varied sources of revenue and to reduce their dependence on oil and petroleum. The GCC countries’ decision to unify their VAT implementation is according to their longstanding economic agreement and customs union.

Things you need to know about VAT implementation in GCC?

VAT accounting is an international tax and works the same way across the world. The value-added tax will be added for the first time in the Gulf Cooperation Council, and this revolutionary step will be taken from January 2018 onwards. All the GCC countries will have time from January 1, 2018, till January 1, 2020, to implement the new VAT policy. The VAT  accounting will be taxed on transactions, and not levied on the profits. Most businesses will be allowed to charge VAT on the sales, at a standard rate of 5%.

It is expected to bring about a huge change in the functioning of business organizations in those regions, and they will have to adhere to the new rules & regulations. The new laws will be very stringent in nature and businesses will be heavily penalized if they fail to pay the requisite VAT taxes.

What are implications of implementing VAT on GCC countries?

The new VAT regime is a boon for taxation authorities since it brings them the money very quickly as businesses collect it for them. The standard rate of 5% will apply to substantially all of the major domestic supplies made in the normal transactions of business. Certain exemptions and zero rates will apply, but specific GCC members have a powerful degree of flexibility as to whether to adopt standard rate, exempt or zero rates.

The United Arab Emirates have set up January 2018 as a starting date for their implementation, whereas the VAT accounting software in Bahrain will be adopted by mid of the year 2018. Saudi Arabia has also committed to imposing VAT accounting for all goods and services by January 1st, 2018. Kuwait has also agreed to implement VAT accounting, however at a later date in the year 2018. Altogether the Arabian Gulf countries have committed to apply the unified Agreement for Value Added Tax, but all countries are moving at different speeds of implementation, thereby there is less possibility of a harmonious introduction of the levy – however, all nations have assured that VAT system will be implemented in the year 2018 for sure.

What are the various challenges in implementing VAT in the Gulf Cooperation Council?

There is no doubt that implementing the new VAT regime is going to be a tough path and many roadblocks will be faced before there is a smooth transition. There is a lack of clarity regarding the ratification and release of the GCC VAT Framework Agreement, and there is also the uncertainty of domestic legislation that puts the implementation of VAT at a major risk of delay.

At present, there is a complete absence of VAT legislation, and thus the corporate sector will have less time to prepare for this huge overhaul. Business organizations will need to install suitable arrangements and an efficient workforce to collect online VAT accounting software in UAE and pay the complete amount to the tax authorities on a timely i.e. monthly or quarterly basis. The member countries cannot conclude their national VAT laws till they finalize and adopt the GCC VAT Framework Agreement – hence the process has to be speeded up and completed by the end of the year 2018. It is strongly advised that firms should assess their procurement procedures, operational frameworks and systems, contracts and legal models, to be VAT ready and reduce the impact of this imminent change.

How is VAT going to impact different sectors in GCC countries?

VAT is going to be universally implemented across all the GCC countries and there’s no doubt that it is going to have a tremendous impact on a number of industries. Important sectors such as aviation, retail, healthcare, education, banking and financial services will have to conform to the new regulations that will be set down by the online VAT accounting software framework. Taxpayers in these nations will be provided with the full set of rules to understand their obligations of VAT payment and the impact of the taxation regime for each segment of the industry.

Some industry-specific regulations are as follows:

  • There will be a sizeable number of online VAT accounting exemptions that will apply exclusively to financial and insurance service companies and this will require complex classification issues, along with the need for flexible systems and procedures for managing ongoing compliance.
  • Oil and gas is a crucial business sector in all the Middle Eastern countries and it is highly expected that the Government will try to ensure this sector is not seriously affected by the introduction of the new VAT policy.
  •  Real estate industry that deals in the sale of a commercial property are possibly expected to be treated as highly taxable in contrast to the sale of residential property transactions, which is likely to be exempted under VAT system.
  • For the retail industry, VAT compliant accounting software in UAE invoicing and pricing along with the precise VAT classification of sales will be critical. Business promotional schemes, such as loyalty programs and voucher cards, can offer customers relief from technically complicated VAT scenarios and implications.

What business functions will be impacted by VAT in the GCC?

After 100% implementation, the new value-added tax will impact practically every function within a business organization and will be applicable to goods and services throughout the supply chain – at each stage of the production process. Hence, it is of absolute importance that all businesses must stringently undertake and review their current readiness and the implementation of online VAT accounting should not be taken lightly. There should be the timely training of employees who will be dealing with the taxation issues as this is a crucial component in ensuring that all functions of the business will transition in a seamless manner to the new online VAT software administration.

What happens if an organization does not follow the new VAT system in the GCC countries?

It is of absolute importance that all business organizations conform to the new VAT system in the Gulf Cooperation Council countries. If the new framework is not followed, there is a serious risk that the current business procedures will not be compliant with the new legislation. Furthermore, the company may not be able to submit a comprehensive and accurate VAT accounting return document in a timely manner. Non-compliance with the VAT framework will also invite heavy penalties or prosecution, whichever applies. Hence, it is strongly advisable to all businesses in these Middle Eastern nations to review their VAT preparedness and utilize the current time to build a strong foundation for implementation of the new system.

Why do companies need to prepare extensively for implementation of the new model of VAT in the GCC countries?

The anticipatory date for VAT implementation across all GCC countries is 1st January 2018. Given the organizational complexity and huge volume of business transactions, it could take companies a considerable amount of time to evaluate and map out their new procedures for business transactions. This is an important step in the holistic implementation of the online VAT accounting software regime and preparations should be timely started prior to the legislation. A complete review of the existing systems would help companies anticipate the size of the changes and amount of effort required.

What will be the key considerations for GCC country businesses to get VAT ready?

These will be critical areas for companies to focus on, to get VAT ready –

  • Understand the key functional areas of their business that will be impacted
  • Prepare the various scenarios for the design of the new online VAT accounting software structure
  • Plan for the complete training of existing staff and hiring specialized personnel if required
  • Continuously track and monitor the new VAT policy development
  • Review the capability of existing IT systems to adapt to the new online VAT software system
  • Maintain the VAT implementation in line with the overall strategic agenda of the business

Will there be a variance in the application of the rules between the member states?

There will definitely be some level of variance in application of the new rules for online VAT accounting software across the GCC member nations. Similar to the European Union, there will be certain provisions which are compulsory, and others which will be optional in nature, and lastly, there will be some regulations where will be a choice to be made on treatment at a local level. It has to be seen how each member country will approach the adoption of these provisions and this is likely to depend on their internal legal framework, policy settings, economy, Government legislation, etc.

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Rinkesh AnandaniBy Rinkesh Anandani | Last Updated: October 30, 2020



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