GCC companies are not ready yet to meet deadline for VAT

March 15, 2017

undefinedA recent EY webcast shows that with less than 10 months to go before the GCC VAT is implemented, 51% of businesses reported that VAT compliance will be their main area of focus, while just 8% of respondents said they would be concerned about procurement considerations and 10% reported that they will look to address customer and vendor pricing as a priority, according to media reports.

“VAT will impact all key areas of business operations and it is imperative that businesses act immediately to avoid serious issues and costs,” said David Stevens, EY’s VAT Implementation Leader.

From the survey respondents only 13% responded that they with considered education and training of primary importance during VAT preparations.

“Global experience has shown that VAT training and education is fundamental to ensure successful implementation. The focus should be primarily on system and business process readiness, communication, staff training, and sourcing VAT knowledge internally or externally. Compliance with the requirements of the VAT law will follow if these areas are properly addressed,” said Stevens.

Business systems, from fully-integrated ERP systems to stand-alone finance packages will often include standard VAT functionality. However, this is likely to require modification to capture specific GCC regulations. For larger organisations, configuring VAT in their ERP and finance systems will be resource intensive, potentially complex and expensive.

While getting ready within a tight schedule experts expect financial advisers, system specialists and solution providers are also likely to face resource issues, while attempting to support their customer base across the GCC region.

As for multinational companies, the survey showed that 62% businesses said that their head office or parent company was not involved or only partially involved in their efforts to prepare for and implement appropriate system, process and organisational changes to accommodate the VAT regime from 1 January 2018.

Companies operating in the region need a clear and deep understanding of the VAT to prepare for the imminent introduction as announced by the GCC authorities. They need to be aware of the costs associated with the business changes required to successfully incorporate VAT into all their processes and make sure sufficient funding is budgeted for this purpose.

Tax experts have warned that VAT comes at a cost and exposure to penalty if not administered correctly. Companies and traders who are consistently in a position of recovering VAT from the government will need to factor in the potential negative cash flow impacts that their business will be exposed to as well as the likely additional scrutiny their books and records will be subject to by the tax authorities.


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