VAT is coming? What UAE firms must do to prepare
As the prospects of a federal corporate tax and value added tax regime in the UAE gain momentum, organisations need to review a number of aspects including financial systems to assess their overall tax readiness and address possible changes to their own accounting systems, according to audit and advisory services firm KPMG.
“While it may be premature for businesses to start making widespread changes to supply chain functions or to operating and business structures, there are a number of measures that companies must start to actively consider even prior to the introduction, in order to effectively transition to a tax payable environment,” said Nilesh Ashar, Partner, Head of Tax, KPMG in the UAE.
Some of these include modeling the fiscal impact of taxes in business plans by making reasonable assumptions, reviewing intercompany arrangements to determine the basis of cross – charges (or lack thereof), reviewing contracts to assess current position of tax clauses, analysing financial systems to assess overall readiness, and also reviewing the potential impact of taxes on supply chain and operating structures.
“We encourage all UAE organisations to continue monitoring tax developments and updates, and model the financial impact of corporate tax and VAT in their business plans. Internal stakeholder communication and awareness is also key, as both corporate tax and VAT are likely to impact other functions of the business such as finance, legal, IT, strategy etc.,” added Ashok Hariharan, Head of Tax for KPMG Middle East and South Asia region.
“Once the legislation has been established, firms will have to prepare an implementation plan up to the end of the first year to test all tax compliance aspects and get ready to train, hire and develop resources in order to be tax compliant,” he said.
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