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VAT in the Middle East
The introduction of Value Added Tax will be a significant change for businesses. VAT has a broad scope and businesses will need to consider the impact of VAT on all their transactions and the potential impact on prices and margins.
VAT Registration
With the implementation of VAT in the United Arab Emirates (UAE) and Kingdom of Saudi Arabia (KSA) on 1 January 2018, businesses are required to register and to comply with a number of VAT obligations: i.e. charging VAT, issuing tax invoices, filing periodical VAT returns and paying any VAT due to the tax authorities.
While the list of obligations set out above is by no means exhaustive, it is imperative for any business to ensure it is registered for VAT in line with the prescribed timelines of each implementing country.
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What VAT means for your business
- Business impacts
- Reflecting the VAT law
- Compliance
- Technology & systems
- VAT implementation
Business impacts
You should be aware of:
- The potential effects on margins and pricing
- The tax impact from VAT leakage
- The impact on cash flow: funding of timing differences between paying VAT and being paid by suppliers and receiving any refunds
- The VAT issues when undertaking deals
- VAT treatment of sales and exports
- Effect on demand from price increases
- Determine a pricing strategy and impact on payment terms
- Design and roll out of customer communications
- Assess the impact on current contracts and commercial arrangements
- Ensure the VAT treatment of purchases and imports is considered
- Procurement strategy in terms of input VAT capture
- Establish vendor communication plans
- Assess the contracts and arrangements
Reflecting the VAT law
You need to ensure:
- You apply the correct VAT treatment to your sale and purchase transactions
- You are aware of the specific issues related to your industry
- You track VAT on inter-company transactions
- You track and manage your intra-GCC and cross border activities
- You recognise which supplies are zero rated and exempt
- You apply VAT on your acquisition of services from abroad (reverse charge)
Compliance - throughout the value chain
From the start you should:
- Map your business transactions throughout your value chain encompassing procurement, production, logistics, sales and marketing activities
- Have a clear VAT management framework covering governance, control, roles and responsibilities
- Build capabilities and VAT expertise
Technology & systems
Your systems should allow you:
- To be VAT compliant
- To have the correct VAT coding of accounts payable and receivable transactions
- To have appropriate internal controls and processes
The VAT implementation project
You need to consider:
- Sponsorship and governance
- Scoping and sequencing to be ready for the go live date and manage costs
- Sourcing of resources
- Involving all relevant stakeholders
How we can help
What businesses can do now
Project Management
- Identify VAT implementation strategy: in house, outsourced, combined
- Identify and engage key stakeholders
- Appoint VAT implementation project manager
VAT Technical
- Understand VAT treatment of business economic activities
- Perform Financial Modelling to estimate liabilities and costs
Business Processes
- Understand how VAT impacts business functions and processes
Technology
- High level understanding of existing systems (i.e. ERP) to identify capability to cater for VAT
Learning & Development
- Start VAT awareness
- Assess resourcing and training needs
Downloads
An introduction to VAT in the GCC
This publication has been prepared to provide a general overview of how VAT works and the related operational considerations in order to assist businesses to successfully implement the tax and manage VAT post implementation.
Egypt VAT law published in the official Gazette and takes immediate effect
The Egyptian Parliament has discussed and approved the new Value Added Tax (VAT) law on 31 August 2016, and the law has been published in the Official Gazette taking effect on 8 September 2016.
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