TallyPrime for Reverse Charge Mechanism on Electronic Devices in the UAE


TallyPrime for Reverse Charge Mechanism on Electronic Devices in the UAE

A new reverse charge mechanism for electronic goods among registered enterprises has been implemented by the United Arab Emirates (UAE) Cabinet. This will be in effect as of October 30, 2023. Let’s learn about the change and how to use Tally Prime UAE to manage RCM on electronic devices with this blog. Also, look at the features of Tally customization features by Penieltech helping UAE businesses.

UAE VAT on RCM on electrical devices

According to the most recent amendment, you won’t be responsible for calculating VAT about the supply of electronic devices if your company sells them to a registered recipient in the UAE who plans to either resell the devices or use them to produce or manufacture other electronic devices.  

When calculating VAT on electronic items, the recipient should use a reverse charge mechanism. Put simply, for such purchases, the recipient should compute the VAT on their own and claim the applicable input tax credit.

Reverse charge mechanism requirements for electrical devices

Fulfill the subsequent prerequisites to activate the reverse charge mechanism:

  • To furnish electronic devices for resale or to be used in the manufacturing or production of other electronic devices, the buyer must give a written declaration to the supplier. 
  • It is necessary to have a formal declaration verifying the recipient’s FTA registration. 
  • A supplier needs to find out the buyer’s VAT status and purchase intent before making any supplies.  

How to use TallyPrime to handle RCM for electronic devices

TallyPrime provides you with an easy workaround so that you can continue operating your business as usual until the required changes are made to the product to meet the new requirements.  

To begin with, sales.  

Electronic device sales

If you are selling electronic goods to a VAT-registered company that certifies it will either resale the devices or use them in the production of other devices.  

You only need to record a sales voucher in this situation without including the output tax. To record the sales voucher, you can take the actions listed below: 

  • Create a fresh sales ledger with the taxability set to not taxable. 
  • You must choose the newly formed sales ledger when entering the sales voucher.  
  • Furthermore, take notice that sales to unregistered businesses and end users will remain unchanged. 

Buying of electronic products

If you are a registered business buying electronics and have submitted the above-discussed declaration, you must record a purchase voucher and compute the VAT using the RCM method. Since the purchase is being made on an RCM basis, the buyer must record the journal voucher to increase their VAT liability and later claim their input tax credit. 

Keeping a record of the purchase voucher

  • Make a new purchase ledger and select the transaction type as Domestic Purchases – Designated Zone
  • By choosing the new purchase ledger, you may enter the purchase coupon.  
  • As an alternative, you can choose Domestic Purchases – Designated Zone while recording the buy voucher and override the Nature of Transaction for the default purchase ledger in the transaction if you don’t want to create a new one.  

Journal voucher recording for booking the purchase’s VAT liability

  • Tap Alt+G to get to the reverse charge report, or type it in. 
  • To adjust the period, press F2 (Period). 
  • Type Alt+J to adjust the stats. 
  • Choose “Input Tax Credit & Increase in Tax Liability” as the adjustment type. 
  • Choose the choice in the Additional Details field. Buy from a designated zone and declare it to customs No 
  • Save the voucher and mention in the narration that “The voucher is for RCM on Electronic Devices.”

The VAT 201 report shows both the transaction under “Reverse Charge” in “Sales (Outwards)” and the claim for input tax credit under “Local Purchases” in “Domestic Purchases – Designated Zone.”

Wrapping Up

Tally Customization

Customization and effective methods and skills that can facilitate easier and more flexible day-to-day operations are essential for businesses nowadays. Business professionals rely on Tally software solutions for efficient resource management. Tally software stands out as one of the best programs available for handling various tasks. These tasks include inventory management, employee management, reporting, booking, payroll, bank account management, and sales recording. Tally simplifies these processes, making them easy to handle and execute.

Value-added tax (VAT) indicates that joining the Gulf Cooperation Council (GCC) as an individual will provide challenges for local firms since it will impact every aspect of their operations. Continuous risk management and cash flow management will be advantageous for businesses with a well-thought-out and strictly implemented VAT implementation.

We hope this is helpful to you. We will be happy to help if you require additional information or if you have any queries concerning VAT or matters connected to it. 

Be it Tally Training or Tally Customization, our experts are always available to take on the rain of queries to resolve them as soon as possible. Contact Penieltech for more information about how you can rise to the peak with Tally customization and ERP Software Dubai!