'GCC VAT framework by next week, businesses must plan now'

Muscat: GCC countries will announce the unified VAT framework within the next 10 days, according to officials at Ernst & Young.
The VAT structure, signed by all six GCC countries last month, will replicate the European Union style common market framework and will specify items and services on which VAT will be levied.
Eighty per cent of domestic VAT legislation in individual member countries will follow the agreed framework while the remaining 20 per cent will be at the discretion of member states, the accounting firm revealed.
“We can expect the GCC framework to be made public within the next week to 10 days. This is the first time a major indirect tax is being charged on the country ever since customs duty was imposed,” Alkesh Joshi, Director of Tax at EY said at a VAT and income tax seminar with over 350 attendees.
“We have seen most countries dropping direct taxes and replacing them with indirect taxes, which have shown a significant rise.”
Oman is expected to announce domestic VAT legislation around the same time - as early as next week. VAT is levied on every transaction made by a company and can take six to 12 months for a large corporation to prepare VAT infrastructure. It is expected to contribute nearly 1.4 per cent of GDP – an estimated $1.1 billion every year. Essential food items, services such as hospitals, and education are expected to be either zero rated or exempted in the framework.
Companies not prepared
Meanwhile, Joshi said that it is high time for companies to prepare for VAT while highlighting an EY VAT readiness survey which revealed that 50 per cent of companies in the GCC have done nothing to prepare for the new tax and only 11 per cent have considered its impact on their businesses.
“All GCC countries have indicated their willingness to adopt VAT from 1 January 2018. This could bring in a situation where the corporate would be given less than 10 months’ time to prepare for VAT implementation. “Companies need to start preparing IT systems and human resources, among other things, to be prepared for this.
“It is an alarming number of companies who have done nothing about VAT yet. It is high time companies became VAT compliant and start engaging with stakeholders to discuss it as it will have a massive impact on business,” Joshi said
“Companies need to develop an alternate source of cash as there will be situations when they have to file VAT before being paid as payments can take up to a year depending on transaction clauses. This is very important to maintain cash flow,” Joshi siad.
“A delay is possible. We may have to wait three to six months for VAT to be put into practice in Oman after the first GCC country implements it due to the process it needs to go through for approval,” he added.
High job demand
The demand for tax professionals is going to rise substantially according to an EY official.
“A few years ago most people believed Oman is a tax free country but now, the corporate income tax and VAT are going to drive the need for tax experienced individuals in the country. The demand is going to be very high,” Manjot Singh, Executive Director of Tax at EY said.