GCC businesses are in multiple stages of VAT preparedness

GCC businesses are in multiple stages of VAT preparedness
In the UAE, VAT experts expect 95 per cent or more of companies will comply in the initial stage.

dubai - 69% of businesses said they may not be adequately prepared for the implementation



by

Issac John

Published: Wed 12 Apr 2017, 7:11 PM

Last updated: Wed 12 Apr 2017, 9:22 PM

As the GCC countries get ready for the introduction of value added tax (VAT) in 2018, 69 per cent of businesses that took part in a regional survey voiced concern that they may not be adequately prepared for the implementation of the landmark reform.

The survey conducted by Deloitte has revealed that while 96 per cent of respondents confirmed they were aware that VAT is going to be introduced in the GCC, less than half believe that the tax reform would be introduced in the very near future.

Since all six GCC states had signed the VAT treaty, governments have been taking concrete steps towards VAT implementation by January 1, 2018.
Positive actions being taken by the governments, such as official announcements by the General Authority for Zakat and Tax in Saudi Arabia and the launch of a series of public awareness sessions by the Ministry of Finance in the UAE, have been adding momentum to the final preparations.

Justin Whitehouse, Deloitte Middle East indirect tax expert, said such actions indicate that all is on track for the target implementation date of January 1, 2018, and businesses should be taking their preparations seriously by this point.

However, in the UAE, VAT experts expect 95 per cent or more of companies will comply in the initial stage. The government is targeting around Dh12 billion of revenue from the initiative in the first year, which is about 0.9 per cent of the UAE's gross domestic product of $371 billion in 2015.
Experts anticipate that the VAT framework will shortly be made public now that all six GCC countries have signed the unified VAT agreement (the VAT framework).

Younis Al Khouri, under-secretary at the UAE Ministry of Finance, said the GCC governments were planning for an early, simultaneous adoption.
Businesses will be given till the end of 2017 to prepare for the VAT system before the tax law goes into effect early next year. Businesses across the UAE are expected to document their finances and to keep accurate accounting records, updated on a regular basis. Companies whose annual revenues from goods and services subject to VAT that exceed the threshold determined by the tax law will be required to register with the Federal Tax Authority.

Help of VAT specialists
Deloitte said its indirect tax client survey, which spans all industry sectors, provides a true reflection of the opinions of the business community as a whole. Some 71 per cent of the manufacturing industry respondents thought they would need the help of VAT specialists, whereas 52 per cent of the energy, resources and utilities respondents thought specialist advice would not be needed.

Deloitte conducted a parallel survey among clients of Deloitte Malaysia, titled 'The Journey to Malaysian Goods and Services Tax (GST)', to offer insights from businesses that have very recently been through a GST implementation process.

To compare with their Malaysian counterparts, 69 per cent of the GCC respondents estimated it would take longer than six months for their business to adequately prepare for the introduction of VAT although 30.91 per cent thought it would take their business less than six months to get ready. This contrasts significantly with the Journey to Malaysian GST survey, in which only 10 per cent of respondents needed less than six months to prepare.

"We are reaching a critical point in time for businesses to react to the quickly-evolving tax environment. We have summarised in this survey the full results which demonstrate where businesses are today," said Whitehouse.

"There is a great deal to be done for every business to be able to achieve day one compliance. We hope these results provide some interesting food for thought on the commencement of the implementation journey," he said.

- issacjohn@khaleejtimes.com


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