Vat gets vote of confidence

Vat gets vote of confidence

By Waheed Abbas

Published: Mon 6 Aug 2018, 3:18 PM

Last updated: Mon 6 Aug 2018, 5:30 PM

Companies in the UAE and Saudi Arabia have given a vote of confidence to the implementation of VAT with 65 per cent of them having successfully filed their first VAT returns by April 2018.
According to the Association of Chartered Certified Accountants (Acca) and Thomson Reuters' VAT Return Filing and Compliance survey conducted in April, only 18 per cent of companies had found filing their first VAT returns "challenging" and eight per cent "very challenging".
Pierre Arman, market development leader for tax and accounting at Thomson Reuters, said that at the time of the survey in April, a lot of companies' first VAT return deadline had been pushed by the Federal Tax Authority by one or two months, hence, about a third of firms did not file a VAT return at the time.
Anurag Chaturvedi, managing partner at Chartered House, said based that on their knowledge and experience in assisting companies for their VAT compliance requirements, majority of the firms complied with the requirements to file returns. Companies may have failed in complying with the requirements regarding return filing due to lack of proper knowledge of the VAT regulations, lack of proper guidance in complying with the VAT law and regulations and limitation in the IT system, etc.
Nirav Shah, director of Fame Advisory, said some of the companies here are actually falling within out-of-scope transactions, whereby most of their dealings are outside the UAE. However, there are also lot of companies operating in designated zones that are unaware of the compliance that they need to carry out and hence are not filing returns.
The UAE and Saudi Arabia implemented 5 per cent VAT on a host of goods and services to boost revenues after oil prices had dropped substantially. The UAE is expected to earn Dh12 billion and Saudi Araiba SR35 billion in VAT revenues this year.
According to the Acca and Thomson Reuters survey, majority of the companies in the UAE and Saudi Arabia found VAT experience clear and positive with majority of them - 66 per cent - are opting for internal VAT sourcing. Around 60 per cent used their in-house resources while 32 per cent relied on some tax advisory service and 8 per cent outsourced it to a tax advisor.
The survey found that 63 per cent firms are happy with current in-house process and 16 per cent were considering moving from outsourced to in-house process.
 
Challenges
On the challenges faced by GCC companies in filing their VAT returns, Thomas Vanhee, partner at Aurifer Middle East Tax, said since VAT is applicable only for supplies taking place in 2018, many mistakes have been made for invoice issued in 2018 which concern supplies made in 2017.
He pointed out that one of the most common and underestimated pitfalls that triggers important financial risks are output VAT treatment and out-of-9scope supplies; determining the correct VAT treatment of each supply; and deductibility of expenses and incorrect deductions which might lead to a heavy penalties.
Highlighting the challenges, Chaturvedi pointed out that the lack of understanding and interpretation of the tax law and regulations, not enough specialised resources to understand and implement VAT and documentations and record-keeping complying with the VAT law were some of the challenges faced by the companies when preparing for VAT.
Shah said challenges are mainly related to, first, not fully understanding the compliance implications. Then, it's about not being fully-prepared with their finance team to produce required data to file the return as lots of companies did not do proper accounting in the pre-VAT period.
Over 250 participants took part in the survey with around 70 per cent from the UAE and the remaining from Saudi Arabia. - waheedabbas@khaleejtimes.com
 




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