As the social and economic effects of the COVID-19 pandemic impact our businesses, both positive and negative, what is abundantly clear is that it’s no longer business as usual.
Governments across the GCC have announced various stimulus packages to minimise the impact, but businesses cannot rely on these to survive. Whilst they are useful, one needs to revert back to basics and protect cashflow.
Common techniques would include trying to negotiate extended credit terms, request a moratorium on rent payments, freeze on capex, deferring operating expenditure etc.
An area often overlooked is VAT.
Many of these services are now being cancelled or postponed indefinitely. In circumstances such as these, the supplier should raise a tax credit note immediately
A common business practice is to raise an invoice in advance of the provision of goods or services in order to receive an advance payment. This act immediately triggers a supply for VAT purposes. Many of these services are now being cancelled or postponed indefinitely. In circumstances such as these, the supplier should raise a tax credit note immediately.
Where a supplier provides a continuous service, they can review the timing of their billings.
When making use of the VAT legislation to assist you during these difficult times, one needs to take proper advice so as not to cross the line and end up contravening the legislation as the penalties imposed by the tax authorities could be significant.
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