VAT poses challenges for family-run businesses in GCC
Family-run businesses in the GCC need to conduct a comprehensive VAT impact assessment of the operations.
Dubai - Every family office operating in the GCC will be affected by VAT
Family-run businesses in the GCC face significant challenges and need to assess their strategy carefully regardless of the industry segment they operate in when value added tax regime comes into force, tax experts said.
Tax experts at EY and Thomson Reuters said the increased compliance requirements mean that family-run businesses would need to decide which department would be responsible for VAT and related compliance.
"It may be the right moment to assess the duties and responsibilities of a family office in this regard, if already in place, or assess the feasibility of the set-up of a family office as part of the family's wealth strategy," they said.
EY and Thomson Reuters have partnered to discuss the impact of VAT on family-run businesses, the various opportunities and challenges that businesses may face, and how best to tackle these obstacles to be prepared for VAT implementation.
David Stevens, GCC VAT Implementation Partner, EY, said in order to ensure VAT readiness, family-run businesses in the GCC need to conduct a comprehensive VAT impact assessment of the operations, goods and service flows, identifying and segregating business and family related expenses, and defining the scope of the required VAT and organisational structure and resources.
"It is vital for family businesses operating in the GCC to raise awareness across the entire organisation, educating all employees about the implications of VAT and potential penalties in the case of non-compliance."
Ismael Hajjar, Mena Private Client Services Leader, EY, noted that it is an ideal time for GCC family businesses to reconsider their approach to ownership structures and family governance along with conducting VAT assessment analyses.
"In fact, reviewing the legal structures and considering efficient tools to streamline the family wealth with business investments are important prerequisites for a successful VAT implementation. Ignoring such measures may result in significant costs and inefficiencies."
A study by Deloitte said family-owned offices, importers/exporters, and technology, media and telecom firms would be impacted in various ways, therefore, they need to ensure that they're prepared for VAT ahead of its implementation from next year.
"Every family office operating in the GCC will be affected by VAT because anything purchased in the GCC is likely to be subject to VAT. In addition, family offices will inevitably be dealing with VAT registered businesses as suppliers, or advisers to the family, and they will need to ensure that the VAT is treated correctly," said the study.