Ever since the news of VAT (value added tax) being implemented in the UAE has surfaced, GCC businesses have been trying to prepare themselves for the new tax regime. The UAE Finance Minister had earlier this year stated that VAT will be applied at the rate of 5% in the UAE from January 1, 2018. The major effect of the change will be faced by the business sector where businesses will have to get aware of the new tax methods if they want to continue to make the profit.
According to a series of surveys conducted by accounting firm Deloitte for the businesses and executives in the Gulf region, more than 60 percent of GCC companies are getting more familiar with the rules and methods of VAT as the scheduled date of implementation is approaching. Deloitte has been conducting regular surveys of the Gulf businesses ever since the first news of the next VAT based system was revealed. As compared to the initial survey results, the latest ones show a drastic improvement in the views of businesses towards VAT. They are becoming more aware and informed of the rules and impacts of the indirect tax system.
The new VAT system was officially announced earlier this year for all the GCC countries. VAT is likely to be implemented at 5% rate for most of the commodities except the basic food items, education, and healthcare. The UAE and Saudi Arabia are expected to implement the tax system as per schedule on 1 January 2018, while other Gulf countries may still need more time to accept and implement VAT.
The latest Deloitte survey of the Dubai based businesses shows that more than half of companies feel ready to accept VAT as compared to the previously received response where only a quarter of businesses felt comfortable with the new tax. This clearly shows that GCC businesses and executives are making much-needed efforts on their own to get informed about VAT. The governments of Saudi Arabia and the UAE have also been making necessary efforts to communicate as much information about VAT as possible with taxpayers over the past few months.
While half of the GCC businesses are confident that they will be VAT ready by 1 January 2018, the remaining half still seem too confused about the VAT compliance rules and procedure. The government has notified that VAT will be applied nonetheless, and it would be better for these businesses to begin preparations to ensure VAT compliance. The government, consultants, businesses, tax practitioners and everybody else is gearing up for the new tax system across the region. Taxpayers and businesses, who still feel uninformed or not-ready for VAT, can take help from the VAT awareness campaigns launched by the government and other authorities.