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.

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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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VAT Registration

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Our VAT compliance publications

What VAT means for your business


  • Business impacts
  • Reflecting the VAT law
  • Compliance
  • Technology & systems
  • VAT implementation
Business impacts

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
Technology

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

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 and systems

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
Technology and systems

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

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VAT Technical

  • Understand VAT treatment of business economic activities
  • Perform Financial Modelling to estimate liabilities and costs

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Business Processes

  • Understand how VAT impacts business functions and processes

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Technology

  • High level understanding of existing systems (i.e. ERP) to identify capability to cater for VAT

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Learning & Development

  • Start VAT awareness
  • Assess resourcing and training needs

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  • How VAT impacts you

  • Financial Services
    Financial Services

    Financial Services

    Financial Services

    The treatment of VAT for financial services can be complex as it can be difficult to measure the implicit financial fee and to define the value added. There are various models that could be adopted and it may differ between GCC countries.

    Find out more

  • Insurance
    Insurance

    Insurance

    Insurance

    In some VAT jurisdictions, life insurance services are exempt from VAT - this may be the case in the GCC. However, others have not granted exemptions and supplies of life insurance in those jurisdictions are taxable at standard rate.

    Find out more

  • Oil and Gas
    Oil and Gas

    Oil and Gas

    Oil and Gas

    The introduction of VAT will affect the upstream, midstream and downstream operations of oil and gas companies. Due to the importance of the oil and gas sector in the region, some or all parts of the supply chain could be zero-rated for VAT purposes.

    Find out more

  • Education
    Education

    Education

    Education

    Prescribed education supplies are traditionally exempt from VAT and this may be the case in the GCC although some countries could be contemplating the application of a zero-rate.

    Find out more

  • Healthcare
    Healthcare

    Healthcare

    Healthcare

    Prescribed healthcare services are traditionally exempt from VAT and this may be the case in the GCC although some countries could be contemplating the application of a zero-rate. However, other related services and supplies may be subject to VAT.

    Find out more

  • Hospitality and Leisure
    Hospitality and Leisure

    Hospitality and Leisure

    Hospitality and Leisure

    In most VAT jurisdictions, supplies of hospitality and leisure (H&L) are considered as taxable under VAT. As such, H&L suppliers are required to charge VAT on their supplies mostly at standard rate and they are entitled to deduct/recover VAT incurred on their expenses.

    Find out more

  • Utilities
    Utilities

    Utilities

    Utilities

    It is expected that the supply of all types of energy by utility providers will be a supply of goods for VAT purposes. As a result, where the energy source is not transferred outside the GCC geographic boundaries, it will be liable to VAT within the GCC, regardless of the establishment of the utility provider/customer.

    Find out more

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.

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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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Our insights

Contact us

Dean Kern
Tax and Legal Services Leader
Tel: +971 4 304 3575
Email

Jeanine Daou
Indirect Tax Leader, PwC Middle East
Tel: +971 (0) 4 304 3744
Email

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