A tax accounting software is an accounting software which has an inbuilt capability to generate the tax reporting from its accounting records with minimum efforts. It fully meets your business needs and 100% complies for VAT requirements.
Accounting Software play a vital role in helping business to comply the VAT requirements. Some of the major Vat requirements that needs to be fulfilled by an accounting software are:
1) Filing of Monthly or Quarterly VAT returns
2) maintaining the books of accounts for a period of 5-10 years
3) issuing Tax Invoices/Debit -Credit notes
4) generating Audit File (FAF)
For the ease of taxpayer, FTA has issued strict requirements which an accounting software should meet in order to be qualified as 'Tax Accounting Software'. In addition of meeting the business requirements like managing accounts payable, accounts receivable, inventory management, order management, billing etc. the accounting software is one which helps the businesses in producing the accounting information into tax reporting.
For instance if a sales transaction is recorded in tax accounting software, it will help generate
a) Vat compliant tax invoice
b) Reporting of sales and VAT details into VAT Returns (VAT Return Form 201)
c) Maintaining and generating other reports like Audit file (FAF) as required by law
It also takes care of the generating other MIS and adhoc reports as required by the management.
Following are the tax accounting software requirements which software need to meet in order get FTA certification:-
1. The tax accounting software should automatically generate non-editable VAT return files as per the format prescribed by FTA with no assistance required from the software vendor or any other IT specialist.
2. Automatic generation of FAF (Audit File) by a user. The FAF should be complete, accurate, and in a format that is readable by the FTA.
3. Supports issuance of tax invoices, credit/debit notes that complies with the VAT Law.
4. The tax accounting software must be accompanied by comprehensive documentation to assist auditors, and internal or other users in understanding how the software operates. This would include a user manual (printed and/or web-based) and thorough system-based help files.
5. Software vendors must incorporate adequate internal controls to ensure reliability of the processed data
6. Access controls to ensure that only authorised users can access and process data based on the permissions given
7. Password control features should be built into the system, i.e. password should be changed upon initial login, minimum length password requirement should be met, it should be bit complex, have not used earlier, etc.
8. Inbuilt validation controls to prevent, detect and correct the Incomplete and invalid data to ensure that details in VAT return and FAF file is complete and accurate.
9. Inbuilt control to prevent the editing and deleting of entries made.
10. The tax accounting software has suitable provisions for back-up of data and restores as when required.
11. The system should allow creation of multiple user profiles with different access rights
12. The system should have the capability to generate configured reports on weekly, monthly, quarterly and annually.
13. System should allow generation of ad hoc reports
14. System should ensure reports are as per agreed format
At regular intervals, FTA verifies the Tax Accounting Software in accordance with the guidance issued. The accounting software which meets the requirements is accredited or certified by FTA as 'Tax Accounting Software' and is listed in FTA' Tax Accounting Register (TASR).
One of the FTA’s requirements is for the tax accounting software to automatically generate a VAT return file as per the FTA format, and allow businesses to use this file to fill in the returns form on the FTA e-tax portal, i.e., the Integrated Tax Administration System (ITAS). Involvement from both FTA system and tax accounting software vendors is required to enable this feature. It is important to note that the system should have capability to generate the VAT return file in both excel (.xlsx) and .xml formats.
The file should also contain the following details, which will serve the purpose of credentials:
There are two options by which businesses using certified tax accounting software can file their tax returns automatically on the e-tax portal.
Option 1: Manual upload of tax return file onto FTA’s e-Tax portal.
Option 2: Direct upload of VAT return file from certified tax accounting software onto FTA’s e-tax portal.
Details can be obtained from the software vendor/FTA website
Tax accounting software is a useful tool to help businesses keep important and useful accounting records. Software vendors can add value by designing their tax accounting software to be in compliance with this guide, thereby helping businesses to comply more easily with their tax obligations and record keeping.
Tax Accounting Software providers who adheres to the above guidelines of FTA should provide a written declaration in the form provided by FTA that their software adheres to these requirements and guidelines. The FTA will review the application and if it meets all the criteria, application will be approved by FTA.
Upon approval software vendor will then receive an email from FTA along with a confirmation reference number to make a payment of AED 10,000 to complete the process. Upon payment reference number should be mailed to FTA to complete the declaration process.
The name will then be listed by the FTA in the Tax Accounting Software Register (TASR) as per the cycle mentioned in the certification document.
Exhaustive list of the FTA accredited software/vendors can be accessed by copying the below link in the web browser:
https://www.tax.gov.ae/en/tax-support/tax-accounting-software-vendors/accredited-accounting-software-vendors
It highly recommended for businesses to use the tax accounting software which is certified or accredited by FTA. This is because, it guarantees to automate all tax-based responsibilities, i.e., keeping track of records, payments, file returns, etc. and saving businesses time and reducing the compliance cost.
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