Time running out for VAT readiness, firms told
Dubai - The adoption of VAT across the GCC region will be both exciting and challenging
The introduction of value added tax in 2018 will generate new revenue streams for public sector spending in the UAE and other GCC states and align the regional markets globally, tax and legal experts said.
The adoption of VAT across the GCC region will be both exciting and challenging for the regional markets, said Hisham Farouk, CEO of Grant Thornton UAE.
"Not only will it generate new revenue streams for public sector spending, but also instill greater transparency in the economies of the region," said Farouk.
Speaking at a conference on the implications of VAT on businesses in the UAE hosted by Emirates Institute for Banking and Financial Studies (EIBFS), Farouk said for the successful implementation, it is critical that a significant level of investment is made in awareness and education of all industries, specifically financial institutions. "EIBFS is taking some very proactive and necessary steps in providing this awareness to the financial community, and it is fundamental that this is continued by all."
Pierre Arman, Market Development Lead for Tax and Accounting at Thomson Reuters, said time is running out for companies to ensure preparedness for the introduction of VAT in the GCC region in 2018. "From assessing the impact of VAT on their organisations through to the readiness of their IT landscape, there is a lot to be done in a very limited timeframe," said Arman. "VAT awareness events are crucial for the business community to understand what considerations different industries need to take into account in a post-VAT world, especially a notoriously challenging industry such as financial services that is typically more complex to manage under VAT due to its special status," he said. Justin Whitehouse, Managing Director and Indirect Tax and VAT leader at Deloitte Middle East, said: "Events such as the EIBFS conference on VAT serve as a great businesses need to take VAT seriously and use forums such as EIBFS to ensure they understand what they need to do, especially within such an important sector to the UAE economy.
"In the past few years, the UAE has taken visionary steps towards a non-oil-reliant economy with a focus on economic diversification and boosting non-oil revenues. Introducing VAT is another key initiative to enhance the resilience of the national economy," he said.
An International Monetary Fund (IMF) analysis has shown that implementing VAT at the nominal rate of five per cent will contribute 2.7 per cent to the UAE's non-oil GDP.
The one-day conference addressed a variety of topics including the economic impact of VAT, learning experiences from other countries that have implemented the tax, and new regulations affecting the financial sector and businesses in general. Across six lectures, the speakers explained the intricacies of the new taxation law with a focus on how it will influence the day-to-day operations of financial and business entities.
Since the VAT law is not yet out in the public domain, companies find it difficult to ascertain the impact of the new tax on their business and prepare for it accordingly. In addition, the limited time between passing the final law and the implementation date may also pose a challenge. Jamal Al Jassmi, General Manager of EIBFS, said the upcoming implementation of VAT in the countries of the GCC region represents a landmark tax reform, ushering in a new era in the world of public finances and providing a stable revenue base for the future.
"With the UAE economy maturing and diversifying away from oil dependency, this is the right time for such a step. However, businesses, especially small and medium-sized enterprises, have to adopt certain measures to prepare for the new tax so that January 2018 does not bring any unpleasant surprises," said Al Jassmi. - email@example.com