With less than six months until the GCC implements value added tax (VAT), a new survey from ACCA (the Association of Chartered Certified Accountants) and Thomson Reuters has found that there is a significant lack of preparation and awareness among businesses in the region of how it will affect them.
The report, Are GCC businesses equipped for VAT?, has found that only 11% of respondents understand the impact that VAT implementation will have on their business, whilst 49% are yet to commence their impact assessment.
The report has also raised concerns about the advice and expertise available for businesses, with regional regulatory differences likely to test their finance and IT capabilities.
More than one third (38%) said they lacked in-house resources, whilst 44% described their resources as ‘limited.’
Meanwhile, 88% of organisations surveyed said they had not made any budget provisions for VAT in 2017 ahead of its implementation. Only one quarter (25%) said they had engaged with their tax advisor on the subject of VAT.
Responding to the report, Chas Roy-Chowdhury, Head of Taxation at ACCA, said, the lack of preparation is a concern; companies should be using the pre-implementation period wisely to understand compliance, legal obligations and the financial risk associated with VAT. While the overwhelming majority realise it will affect their business, only a minority have a clear plan of how to effectively manage such a significant fiscal reform.
Tax advisors and professional accountants connected to the region have been working hard to understand the changes and help businesses navigate the transition successfully. This process needs to start now, otherwise companies could risk fines and avoidable regulatory burden.
Businesses in the GCC should urgently seek out the guidance of tax advisors and create a roadmap to make themselves VAT ready for 2018.
Pierre Arman, Market Development Lead for Tax and Accounting at Thomson Reuters said: The introduction of VAT will introduce new revenue streams for government, encourage foreign investment and aid the diversification of the economy.
Yet its introduction should be seen as an organisation-wide challenge: it should not be left to finance and IT functions to manage overnight. Companies should also not wait until the laws and regulations are finalised to start the process; much of the preparation should be done already.
We hope this survey goes some way to informing businesses across the GCC about what they need to do to be VAT compliant, given we have only six months to go before the implementation date.
Over 330 people participated in the Thomson Reuters and ACCA VAT Readiness Survey from across the GCC region. The respondents were from a diverse range of industries including financial services, oil and gas, manufacturing and retail.