Majority of companies yet to start VAT preparation: Survey

Business Tuesday 14/March/2017 16:24 PM
By: Times News Service
Majority of companies yet to start VAT preparation: Survey

Muscat: As many as half of the businesses said they have not started any preparation for the proposed introduction of value added tax (VAT) in the Gulf region, according to a survey conducted by Ernst & Young.
Only 11 per cent of respondents reported that they had evaluated the changes that are needed to their financial, operational and information technology processes (enterprise resource planning systems). Clearly, for many businesses in the Gulf Cooperation Council (GCC) region the time to get started is now.
Although communication about the timeline for VAT implementation and details of the framework have been delayed, January 2018 is the stated target date and the underlying VAT principles are based on VAT regimes adopted in countries, such as Singapore and Malaysia, and overlaid with the European Union’s reverse charge principles to deal with intra-GCC trade.
Any further delays in issuing country specific VAT laws will not prevent companies from preparing for VAT in the GCC region.
Companies need to address contractual, financial and technology considerations well in advance of the VAT introduction. VAT implementation challenges include finance and administration issues, such as cash flow, VAT refunds, input tax recovery, tax payments and accounting periods, imported services, information technology issues, such as system changes, system replacement, compliance, auditability and tax engines. Companies have to address procurement issues, such as multiple transaction types, vendor registrations and preferential treatment.
Also, human resources issues, such as fringe benefits, communication, staff education and training, policy and procedures will also have to be addressed.
With 10 months to go before the GCC VAT is implemented, 51 per cent of businesses reported that VAT compliance will be their main area of focus, while just 8 per cent of respondents said they would be concerned about procurement considerations, and 10 per cent reported they will look to address customer and vendor pricing as a priority. VAT will impact all key areas of business operations and it is imperative that businesses act immediately to avoid serious issues and costs.
Further, only 13 per cent of businesses responded that they considered education and training of primary importance during VAT preparations. Global experience has shown that VAT training and education is fundamental to ensuring successful VAT implementation.
Businesses 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 VAT law will follow if these areas are properly addressed.