Page 61 - Focus Group

Importance of

Master Data Management (MDM)

for VAT compliance

Big companies rely heavily on Enterprise resource • Banks normally maintain master data on
planning (ERP) systems to manage their business customers, financial products and departments
functions within a centralized and integrated (loans/ credit card/ investment banking, etc.)
system. In recent times, many Small and Medium which can be judiciously used to define the
size enterprises have also implemented ERP’s eligibility to claim input VAT for cost incurred
owing to the cost reduction and productivity by the different departments (for Exempt Vs.
enhancement benefit offered by these systems. Standard Rated supplies).

One of the key advantages of ERP systems is that the Missing, incorrect or outdated Master Data is a big
different process modules such as Finance, Invoicing factor affecting efficient VAT compliance. Further,
and Customer Management, Manufacturing and there is lack of clear ownership of data and processes
Production Control etc. are integrated and share the when it comes to managing the tax specific fields.
same common ‘master’ data structures maintained
within the ERP. To overcome these challenges, tax teams need to
identify tax-relevant fields across different master
Master data is often called a golden record of data elements. The next step is to fix the right
information in a data domain and varies from level of ownership within each process for ensuring
industry to industry. As VAT is a pervasive tax applied quality of Master Data elements for VAT. Finally,
on all industries, several master data components it is important to recognize that maintenance of
are of critical importance to ensure right VAT tax related data elements is just as important as
compliance. A few examples are listed below- creation. It is advisable to incorporate periodic MDM
checks within the company’s internal audit protocol
• The Customer and Supplier Masters contain
records of Customer/Vendor VAT Registration to ensure robust maintenance of tax-sensitive data
elements. This will help the company to be well
status and VAT ID information critical for proper
VAT reporting to FTA. prepared with the necessary data requirements for
any VAT Audit by Federal Tax Authority in the future.
• Manufacturing companies maintain Products/
Materials Masters which define the VAT
treatment of the item when a transaction is
undertaken.

• Patients, equipment and supplies are among
the Master data in healthcare organizations,
which can be used to distinguish the VAT
application on B2B transactions (Standard
Rated) Vs. B2C transactions (Zero Rated). CA Pavithra Balaji

Disclaimer:
This article and/or write ups and/or any of its content shall not be treated as opinion and/or advice in any circumstances of the author(s) and/ or the Chapter. Reader’s to apply their best
judgement in the best interest of their requirement and should seek a formal opinion on any issue.

The Institute of Chartered Accountants of India (Dubai) Chapter NPIO TAX JOURNAL 2020 61