The recent introduction of 5% Value Added Tax (VAT) in the KSA and UAE has not impacted deal flow in the GCC as the tax rate is relatively low compared to global markets.
But many companies found themselves unprepared for the January 1 implementation date and are now scrambling to ensure they become tax compliant to avoid penalties.
This was the consensus during accountancy and finance body ICAEW’s Corporate Finance Faculty roundtable about the impact of VAT on deals in the GCC.
ICAEW members and guests gathered in Dubai to discuss the impact the introduction of VAT has had on deals in the GCC. The event was held at the Capital Club in the Dubai International Financial Centre (DIFC).
Michael Armstrong, FCA and ICAEW Regional Director for the Middle East, Africa and South Asia (MEASA), said: “We are living in a very exciting period. There is no doubt that VAT implementation will improve business conditions and create more stable economies over the long run.”
Speakers highlighted how smaller businesses with no access to experienced tax advice are struggling with the compliance processes.
Panellists agreed that the construction, real estate and export industries are sectors that are significantly affected by VAT. Due to the long tenure of construction projects, businesses with existing contracts hadn’t factored in VAT when planning and found it difficult to pass the cost of the tax onto their customers.
Panellists applauded the UAE government’s efforts to provide guidance to make the VAT implementation process as easy as possible for all stakeholders.
Armstrong added: “As a young legislative body, it’s tough for the UAE tax authority to address all concerns raised by businesses. It has been a hasty incorporation process, but as time unfolds, VAT will create a more transparent, credible and internationally accepted economy. Time will tell whether this increased transparency will make the UAE more or less competitive.”
Panellists advised that VAT is a system which has been proved to work in the UK and Europe for decades. As businesses become acclimated to the recent fiscal changes, the taxation system should gradually become more automated and seamless.
The event was attended by more than 100 ICAEW members and senior business representatives from the major global and regional financial organisations.