Using codes to streamline
Using the right tax codes are important for automated
submission of VAT returns explains Ali Hyder at Focus Softnet.
ow that VAT has been introduced in the UAE
and Saudi Arabia, what are the best practices
that have been embedded in your products
alue Added Tax is a tax on the use
or consumption of goods charged
at the time of point of sales,
and was introduced into the UAE and
Saudi Arabia on January 1st, 2018. While
end users general bear the cost of VAT,
registered businesses collect and account
for the tax, almost acting as a tax collector
on behalf of the Federal Tax Authority.
The Federal Tax Authority
requirements state that tax systems must
accurately capture and produce relevant
accounting information for tax reporting
through leveraging company information,
purchase, sales and GL data tables. It
must also help to automate business
processes in maintaining a record of taxes,
decreasing the error in tax declaration,
and thus, reduce the compliance costs and
penalties issued to the business.
In addition, the software should
allow the automation of all tax-based
responsibilities, keeping track of records,
payments and file returns in order to save
the business time and money. Accounting
software should also automatically
generate FTA aligned audit files, VAT
return files, tax invoices and debit and
credit notes. The software should then
be able to upload VAT return files on the
FTA’s portal on predefined schedules.
The Focus tax accounting system aims
to encourage minimum user intervention
in data input, and instead focuses more on
process automation to avoid human errors.
The tax code and applicable tax
percentage is determined by following pre-
If your company has multiple TRN
and multiple jurisdictions, Focus picks
the jurisdiction from the financial tag
which you would maintain for separate
Tax category of the product or service,
such as viz standard rate, zero rated
Place of supply where goods or services
are being delivered.
The system will then automatically
pick the relevant tax codes, such as
like SR, ZR, EX, OS, RC, IC, based on
the above combinations.
Out of the transaction data entered,
the relevant tax and accounting data
is captured in a number of ways. The
data entered in all invoices or advance
receipts will be populated by the Emirate’s
standard rated supplies provided the tax
code given in the document is SR.
The supplies subject to reverse charge
mechanism RCM are identified based on
all purchases that have been given the tax
code RC, and where GL posting has been
affected to both input and output accounts.
Ali Hyder, Group CEO Focus Softnet.
All sales with the tax code ZR are
categorised under zero rated supplies, and
all taxable products and services, which
come under exempt categories are flagged
with tax code as EX.
VAT paid on purchases and related
debits which have attracted VAT can be
deducted from the VAT payable, provided
all such entries have been given the SR-
REC tax code.
Once the entries are completed with the
given tax codes, the Focus system will then
automatically populate the submission
report, making it easier for users to
directly submit the values or upload
the submission report using the upload
functionality on the FTA website.