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VAT ImplementationVAT in the GCC - are you ready?
Why is VAT being introduced?
The Ministry of Finance and the wider GCC, have agreed to implement value added tax (VAT) at a rate of 5% from 1 January 2018. This land-mark agreement marks the start of a fiscal reform across the region.
The increased need to diversify the economy, changing operating mod-els and promoting smart initiatives led by technology and employment continue to be key trends. In order to promote such change and create a economy which is safeguarded for the future, governments across the region have introduced various initiatives to reduce the dependency on oil generated incomes and further stabilise the economy, one of which being the introduction of VAT.
VAT will aid in boosting government income, with the introduction set to generate Dh12 billion in its first year and Dh20bn in its second year within the UAE alone, according to the Minister of Economy. The inter-national monetary fund (IMF) said introducing VAT at a low rate could generate between 1.5 to 2 per cent of GDP and aid in driving economic change.
As such fiscal reform aligns the region further, it will create the need to re-evaluate systems, processes, increase the need to upskill profession-als and prepare for the change which such reform brings.
At Grant Thornton, we are working with a number of clients across the region to not only unlock their potential to grow, but to ensure they are effectively prepared and ready prior to the implementation date.
VAT is likely to impact various segments of your business, therefore it is advisable to conduct a VAT mapping programme of your current procedures and processes in order to identify the VAT transformation required.
Depending on the size and complexity of your business and operations, VAT readi-ness can take from three months to a year, with an impact being felt across multiple touchpoints of your business, which include some, if not all, of the functions below:
How will VAT impact your business?
VAT Implementation: Are you ready?
Purchasingand Sourcing
Finance
Logis
tics a
nd
Custo
ms
Systems & ERP
IT Department for Marketing
Sales and
Res
ourc
es
Hum
anLegal
VAT will impact
almost every element of a
business
“Concerned businesses will have time to prepare before VAT will come into effect. During that time, businesses will need to meet requirements to fulfil their tax obligations. Businesses could start now so that they will be ready later. To fully comply with VAT, we believe that businesses may need to make some changes to their core operations, their financial management and book-keeping, their technology, and perhaps even their human resource mix (e.g. accountants and tax advisors). It is essential that businesses try to under-stand the implications of VAT now and once the legisla-tion is issued make every effort to align their business model to government reporting and compliance require-ments. We will provide businesses with guidance on how to fully comply with VAT once the legislation is issued. The final responsibility and accountability to comply with law is on the business.
As quoted on the Ministry of Finance information page
”
https://www.mof.gov.ae/En/budget/Pages/VATQuestions.aspx
VAT ReadinessWhat should you be considering?
VAT Implementation: Are you ready?
What to considerHow will VAT impact your:• Pricing and profit margins
• Cash flow
• Staffing requirements
• Day to day operations during VAT readiness preparations
• Capability of IT systems readiness
• Guidance for creating a VAT implementation roadmap
How we can help• Facilitate setting up of a
Steering Committee and a VAT implementation team in your organisation
• Identify strategic issues that require immediate attention
• Initial review of your ERP system or accounting software to identify capability for VAT readiness
• Assist with advice on staffing requirements for VAT readiness
What to considerVAT will impact every aspect of your business operations.
The Impact Assessment will assist you to identify the VAT touchpoints for each and every aspect of your busi-ness operations. These will include:
• Finance• Sales and Marketing• HR• IT• Logistics• Procurement• Budgeting and Cash Flow planning • Inter-company transactions• Risk Management • Legal
How we can helpUndertaking a complete assessment of your business and operational structure to identify all VAT ‘touch-points’
The objective of a mapping exercise is to ensure that all ‘transactions’ which are potentially impacted by VAT are identifi ed to ensure that the appropriate VAT treatment is applied to these.
What to consider• Do you have the right team and
structure in place to implement VAT?
• What is your VAT implementation roadmap?
• Are you able to comply with the requirements of the VAT Laws and regulations?
• Do you have the whole organisation on-board for this paradigm shift in the way things will be done after VAT is implemented?
• What is your plan for business reorganisation for VAT readiness and compliance with the VAT laws?
• What are you contingency plans if your business structure is inflexible to comply with VAT laws?
• Do you have the opportunity for your industry to lobby for changes to the VAT laws to accommodate unique scenarios?
How we can help• Providing guidance and
implementing best practice on VAT implementation
• Designing a VAT implementation roadmap to seamlessly implement VAT in your organisational structure
• Working with your business units to prepare them for the road ahead
Pre-Announcement of VAT Laws
Phase 1Impact Assessment
Phase 2Response Strategy and Roadmap
What to consider• Design changes to your financial
systems, ERP system or accounting software
• System readiness and User Acceptance Testing
• If you have legacy software and are considering a replacement, you should accelerate the change to avoid duplication of effort
• Design the VAT model to accommodate VAT operations
• Project Management to ensure that all stakeholders are implementing VAT in a coordinated manner
• Do you need to adopt technical positions on VAT laws?
• Vendor and Supplier management and communications
• Legal contracts need to be VAT future proofed
• Staff Training including training for data entry staff on VAT codes
• Staff communication
How we can help• Guidance and assistance in designing
a VAT ready IT solution
• Coordination and engagement of incumbent IT suppliers to implement necessary solutions, changes and to execute migration from legacy systems to new VAT capable platforms
• Design a VAT ready organisational model for all business operational units
• Guidance of adopting Technical positions
• Work with your legal team to ensure that legal contracts are VAT future proof
• Facilitate Vendor and Supplier communications
• Facilitate staff communications including assistance to draft these as well as conduct briefings
• Staff Training including training for data entry staff on VAT codes
• Staff communication
What to consider• ERP and Accounting software
testing
• Forms and VAT documents
• Supplier and Vendor compliance
• Staff communications
• Operational readiness
• Risk Management policies and documentation
• VAT leakage opportunities
How we can help• Design testing models to test
system credibility and data integrity
• Design of forms and invoices in compliance with VAT Law
• Supplier and Vendor communications and briefings
• Staff briefings
• Prepare staff user and standard operating procedure manuals
• Identify opportunities to minimise VAT leakage and cashflow optimisation strategies
• System health checks
• Provide guidance on Internal audit
• Post implementation assistance and reviews
What to consider• VAT filing and compliance
• Technical issues relating to complexity with compliance with VAT laws
• Queries on compliance with VAT laws
How we can help• Assistance in the review of the first
2 VAT returns
• Review of VAT documents and forms to ensure compliance
• Ad hoc testing to ensure system integrity
• Addressing technical queries
Phase 3Target Operating Model
Phase 4Implement, Test and Monitor
Ongoing Support post Go-Live
About usGrant Thornton in the GCC
Grant Thornton is one of the world’s leading organisations of independent assurance, tax and advisory firms. We support dynamic organisations unlock their potential for growth by providing meaningful, forward looking advice. Our brand is respected as one of the major global accounting organisations.
We have been a fast growing large accounting organisation, with the ongoing commitment to continue evolving and developing alongside our clients. We have the scale to meet our clients changing needs, alongside the insight and agility that helps them stay one step ahead.
Our partners and teams invest the time to truly understand our clients busi-ness, giving real insight and a fresh perspective to keep them moving forward.For the past 50 years, we have worked with a number of influential leaders and entrepreneurs, to deliver a ‘distinctive client service’. At Grant Thornton, we have advised our clients on differing challenges across various jurisdictions which has enabled them to continue growing.
We have the autonomy and flexibility to get client service right for our local and global clients. We work to ensure that our clients get a tailored service and that we truly understand their business as if it our own.
We will combine the collective skill and experience of our professionals to deliver a experience that exceeds your expectations.
How can Grant Thornton helpprepare your business for theintroduction of VAT?
Grant Thornton’s VAT and tax team take a rigorous approach to helping you meet the VAT obligations set across the GCC, whatever challenges you may face along the way. Using our finely tuned local knowledge, global experience in preparing business-es to embrace VAT and using our global organisation of member firms, we help you understand and comply with often complex and time-consuming changes which are required.
Our team of specialists have worked with businesses which range in size and industry, alongside supporting government entities in order to support the transition from Phase 1 to full VAT compliance.
Our regional VAT team is based in Dubai, and is lead by Gurdeep Randhay. Gurdeep brings over 23 years of in-direct tax experience, specifically relating to VAT. Having spent most of his profession working and lobbying with government bodies, playing an instrumental role in regu-latory reform, alongside leading the tax practice of one of the world’s largest corporations he offers imperative solutions for businesses who require VAT readiness and implementation.
More recently, he was leading the VAT implementation initiative for a Big Four firm in KSA, where he was the Head of VAT. Additionally he was extensively involved with VAT (called Goods and Services Tax (GST) in Singapore) implementation for clients when it was introduced in Singapore in 1994.
Gurdeep successfully engaged various Revenue au-thorities in VAT/GST controversy including successfully obtaining a multi-million dollar VAT/GST settlement for a US based MNC in Singapore.
Gurdeep Singh RandhayHead of VAT GCC, based in the UAEM: +971 (0)52 925 8350E: [email protected]
Contact usGurdeep RandhayHead of VAT – GCCUnited Arab EmiratesE: [email protected]
Tony WindleAustraliaE: [email protected]
Nasser Al MurgheiryOmanE: [email protected]
© 2017 Grant Thornton.
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their cli-ents and/or refers to one or more member firms, as the context requires.Grant Thornton International Ltd (GTIL) and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL doesnot provide services to clients. GTIL and its member firms are not agents of, and do not obligate, one another and are not liable for one another’s acts or omissions.
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Mike VaughanVAT DirectorUnited Arab EmiratesE: [email protected]
Jassim AbdulaalBahrainE: [email protected] Dr. Sultan Hassan Al DosariQatarE: [email protected]
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