As we all know it, effective January 1, 2018, the new VAT rate will become 11% instead of 10% and that means you should be doing something about it in your systems—in the POS software (where you produce customer invoices), in the Stock and Purchasing module (where you buy goods from suppliers), and in the Accounting software (where you register expenses and generate financial reports). You can read the taxation rules in Arabic here.
If your business is registered to VAT (Value Added Tax) and you’re charging VAT to your customers, then this article is for you.
So what happens?
New Year’s Day is one of the best-selling days, if it’s not the most, business owners passionately wait for and plan weeks before for. It’s the day every F & B business works most, sells most, and turns inventory most. Restaurants and bars celebrate with their customers till very late hours and close their businesses late next day.
Imagine this. Celebrations of NYE (New Year’s Eve) are over, you’re in the morning of January 1, and the opening of the business day should start as scheduled. For some the next business day is off, for some it’s at 12 PM and for other 24-hour businesses their sales is continuous. In all cases, you should start your new business day with the new VAT rate (11%) and that requires updating your systems on time before generating your very first bill in 2018.
So why should I worry about it?
Changing the VAT rate in the system should be an easy task to perform instantly or to schedule in advance, specially in those systems where changing of VAT requires changing the application or upgrading it. However it’s always advised to call your software vendor beforehand to know how to do it properly without troubles.
Even if changing the VAT rate is an easy functionality in your software, operation wise you should consider the following two main challenges:
- Bills and goods receipt notes from suppliers for dates of December 31, 2017 and earlier should be entered before updating the new VAT rate; and that is tricky because your management team responsible for entering invoices and configuring system settings should finish entering of their invoices before the start of the new day where the VAT has become 11%. Seeing that this NYE (2017) is falling on a Sunday.
- For POS software programs where the selling price is VAT included, and this is the case of 98% of Food & Beverage establishments in Lebanon, there should be an easy way to allow restaurant owners to change selling prices easily. If you want to update your selling prices because you cannot afford the charge difference, BIM POS developed a tool that eases fast price updating for thousands of items in one shot.
Is BIM POS ready for the new VAT rate?
Yes. You can update the VAT rate from 10% to 11% from System Setup>Taxes and Charges.
Should I change the VAT rate on each item?
No. Updating the VAT rate from 10% to 11% will automatically calculate the new VAT rate from each item subject to VAT on the POS.
Does it mean my product prices will automatically increase?
No. Since the product selling prices are all taxes included, then updating the VAT rate will deduct more taxes from each taxable item, hence less profits on each item. If your business cannot afford the new rate alteration, then you certainly must increase items’ selling prices to not generate less profits. Changing of products’ selling prices in bulk mode is possible in BIM POS. Call us for more information.
Will my raw materials cost more?
Yes but No. Your suppliers will have to charge 11% VAT on the items you purchase as of January 1, 2018 but costs of items should not change unless the supplier changed the item’s unitary cost before taxes. Let’s say you used to buy 1 Soda Drink from the supplier at 1$ each can before VAT, you were paying the supplier 1.1$ for the total invoice after VAT, with the new VAT rate, the Supplier will charge you 1.11$ for the total invoice. You’re paying the Supplier more but the cost of goods didn’t change.
So who’ll be paying the 1% VAT rate variation?
Suppliers charge you 11% for the goods you purchase, you charge your customers 11% for the items they buy. You only pay the government the difference between what you charged and what you paid. So… The end user!
- Call us to know how to update the VAT rate in your BIM POS software. You can download this tool and run the VAT2018.exe patch before 1/1/2018.
- Call us to know how you can update your prices of items subject to VAT in your store in one shot
- Call us to know how you can enter backdated suppliers’ invoices with old VAT rates after updating your new VAT rate. You can download this tool and run the VAT2018pur.exe patch after 1/1/2018.
POS SALES VAT RATE FIX
Download vat2018.zip tool to schedule the POS auto VAT changing on your BIM POS Masterdine before 1/1/2018.
PURCHASING & ACCOUNTING VAT RATE FIX
Download VAT2018pur.zip tool to fix all purchase invoices of 31/12/2017 (inclusive) and before that were entered with 11% VAT rate after new year's eve (1/1/2018 inclusive).
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