Implementing Odoo Accounting To Meet UAE FTA Compliance
April 18, 2022 / Haroon Juma / IT Blogs
For companies in any sector seeking to manage all enterprise workflows in a fully integrated ERP, Odoo Enterprise provides an excellent option with dynamic online reporting capabilities for consideration.
The simple user interface minimizes training requirements and allows companies to automate their full enterprise processes and maximise internal or customer-facing productivity.
Its support for every business workflow from sales to operations to financial reporting, with inherent flexibility to adapt Odoo to specific company requirements, is an ideal solution as a full functionality enterprise cloud platform.
Odoo accounting provides significant capabilities in managing a range of accounting operations in a more advanced manner than standard cloud-based accounting systems. These include multi-company support, automation of intercompany transactions, advanced reconciliation, budget management, and reporting. Therefore, as an all-in-one platform with this accounting functionality, Odoo offers a robust and cost-effective solution for enterprises.
Since the introduction of VAT in 2018, demands on accounting systems to meet compliance obligations under the UAE Executive Regulations are specifically detailed under Requirements Document for Tax Accounting Software specification.
This specification sets out the functional and non-functional requirements for any accounting software to be accredited by the FTA to assure greater confidence in accounting operations supporting a taxpayer’s tax declarations and underlying workings.
For any ERP software, FTA certification to these accounting software requirements is not a mandatory obligation but compliance should be. It will provide the FTA confidence and assurance in satisfying the veracity of tax calculations and reduce issues under an FTA audit.
Odoo accounting can provide compliance, and in this blog, we discuss what and how Odoo Enterprise can be enhanced to meet UAE requirements.
What Is Required Under The Executive Regulations?
It is common for many companies implementing Odoo to focus on the IT aspects of their system. Your team and/or implementation partner should also consider how the system meets the business and compliance obligations. They can be better managed during the implementation; it is more complex and costly to correct issues later and especially during any audit.
Odoo can meet many aspects and is non-compliant in one area. The good news is our Odoo Apps can close compliance gaps and emulate the requirements under the specification.
The requirements under the FTA specification detail several functional and non-functional areas which can broadly be structured into the following areas.
Odoo Accounting Invoicing Controls
Under Article 59 of the Executive Regulations, the legislation obliges taxpayers to assure they maintain the integrity of their invoicing by guaranteeing the sequential order of invoicing and accurate tax determination. Sequencing must be uninterrupted and verifiable to avoid risks and defense of evasion under an audit.
In addition, using the appropriate accounting documents for adjustments is required. Debit Notes are not recommended as an adjustment document, adjustments should be made through credit notes or additional tax invoices.
Odoo provides the necessary capability to satisfy these requirements managed under careful implementation. The global product ships with more access and fewer controls which can be addressed during the implementation under user rights management.
Audibility and User Controls
The FTA specifications provide great detail in the platform’s expected capabilities under the section: Software vendors must incorporate adequate internal controls to ensure the reliability of the processed data.
This section details the availability, user access security controls, and auditability in the system to identify the user, time, and action affecting committed transactional postings. Clear identification and trace of the actions and users affecting tax and non-tax-related entries must be evident for the FTA to assess whether the entry was a genuine error affecting tax declarations.
Odoo provides a clear reported log of user-related changes to any record to provide insight and further details for investigation if needed. These logs require security protocols to eliminate the opportunity for tampering and Odoo can satisfy this requirement.
Odoo Accounting & FTA Audit File (FAF)
This file provides a detailed transactional export underpinning each filed VAT return containing meta-data and transactional working for sales, tax ratings/determinations, master data excerpts, purchase VAT recovery, and payments amongst other datasets.
The FTA’s objective is to implement a digital tax strategy and reduce the possibility of tax evasion within the economy. The concept of the FAF file is to support efficient desk-based audits through the provision of a standardised file excerpt that could be uploaded to the FTA systems and correlated and reconciled to declared VAT returns.
Odoo does not provide native support for the FTA Audit File Specification. However, our developed free FTA Emulator app provides the necessary format and dataset to emulate the file specification.
This summary is non-exhaustive but nevertheless indicates the possible changes any ERP will need to fully support the UAE requirements. Standard global solutions will most likely miss a number of key requirements. For Odoo to fully meet the correct UAE support, the standard Odoo solution will require key updates.
What Should You Consider When Implementing UAE Odoo Accounting?
As an Odoo Certified implementation partner and Approved FTA Tax Agency, we are often requested to advise and implement the key Odoo apps and changes to optimise Odoo under UAE Executive Regulations. Our structured approach is centered on firstly assessing any Odoo system and operational issues.
This helps to minimise redundant features, maximise existing features and implement enhanced to any gaps under a GAP analysis. The result is an easy to operate and compliant Odoo accounting platform that meets the VAT compliance obligations. Our experience may help also help to set the foundation for corporate taxes due in 2023.
The typical issues seen or should be reviewed include:
1. Odoo Accounting UAE Tax Configurations
Odoo Fiscal Accounting for UAE provides native support for a basic set of Taxes and provision of the Tax reporting in the VAT 201 Format. Often additional assessment is necessary to expand and/or taxes to manage items such as “Out of Scope” transactions which represent sales and purchases not relevant to VAT.
Examples include Designated Free Zone to Designated Free Zone sale of goods. These types of transactions must be recorded and requirements to support this tax rating are subject to specific rules. In addition, taxes that are unused by the business should be cleared to avoid tax rating and reporting errors in selection during sales/invoice entry.
Therefore, it is advisable to take advice and set up the accurate range and operation of taxes and configurations to set up Odoo correctly.
2. Master Data
The use of customer/vendor master data profiles is also a key area to assess and exploit. Tax determination for VAT is sensitive to the product being sold and the place of supply. Suppliers of goods and services can exploit the location of vendors and customers to build tax rating override rules, especially under export/import scenarios.
Products are naturally rated for VAT at the standard rate. If the master data is correctly used to override the default tax rating based on place of supply rules, errors in ratings and risks under over/underpayment of taxes can be reduced with greater reporting of all taxes. For example, if a service is bought from a supplier overseas, the Reverse Charge Tax rule can be automatically rated to the purchase and reported accurately.
This capability is not a default Odoo feature and customization is necessary with a clear understanding of how these rules must operate with any associated requirements to verify the tax selection (for example supporting documentation).
3. Odoo Accounting UAE Reporting and FTA Audit File
Filed reporting must be locked and impossible to change. Your tax returns and underlying calculations must be retained for 5 years and transactional workings fully available under a Tax Audit. Therefore, customization is necessary to lock tax reports from additional transactions for a given period whilst enabling the ability to add the tax to subsequent unfiled periods. Often this is not available on tax reporting even if the monthly account closing period security locks are used.
The FTA file is also additional customization necessary to support the compliance rules.
The result of the above changes should lead to a fully auditable and correctly structured Odoo Accounting system with provisions for FTA Audit File (FAF). This is an essential compliance obligation and will be necessary under any FTA audit.
By correctly implementing these changes one can better manage compliance and operational use of a functional Odoo Accounting system to the UAE Legislation.
As an experienced UAE-based Odoo partner, FTA Tax Agent, and business process outsourcer, our domain and technical experience support clients in maximizing their Odoo investment. Knowledge of end-to-end processes, tax compliance, and knowledge of FTA rules are essential to implementing an ERP in your business with the greatest impact.
The company’s tax obligations are a major cost and risk area which can easily be absorbed into the implementation with the correct understanding and approach. Odoo can support your complete business and our assistance could ensure you not only create more efficiency with better compliance but can also ensure you meet your company’s legal obligations as a taxpayer.
As an official Odoo partner with deep insight into the GCC operating and compliance requirements, SimplySolved has created a range of apps designed to improve enterprise productivity, efficiency, and compliance. This enables companies to build ERP solutions with a low total cost of ownership and avoid uncertainty in customisations. Our apps are specially created to enrich any Odoo UAE and KSA system with key reporting and compliance functionality specified by the respective government bodies such as GAZT, FTA, UAE MOL & KSA MOL.
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