Infidocs Technologies Successfully Completed VAT implementation for a KSA client.
GCC VAT:
The Gulf Cooperation Council (GCC) implemented a Value Added Tax (VAT) system in 2018.
Businesses in the United Arab Emirates, Kingdom of Bahrain, Kingdom of Saudi Arabia, Sultanate of Oman, State of Qatar and State of Kuwait will therefore have to charge 5% VAT on all eligible business transactions. This will affect your business if you are established in one of these countries, or trade with partners in one of these regions.
VAT is an indirect tax applied upon the consumption of most goods and services. VAT is levied by VAT registered businesses which make supplies of goods and services in the course or furtherance of their business. VAT will also apply on the importation of goods.
Key considerations when embarking upon a VAT implementation project are:
- VAT implementation consultants who understand the complete business process and have good hands on experience in implementing Financials, transaction cycles, VAT Payments and Reverse charge mechanism.
- The availability of internal resources such as project managers, business analysts, IT and others needs to be evaluated early.
- An early assessment of the requirement and availability to leverage external resources (such as VAT specialists, IT systems and business analysts as well as project management consultants); upon which the necessary resources should be procured early.
- An early assessment of any impact the introduction of VAT may have on your cross-border transactions and GCC trade as well as any impact on pricing, customers, vendors, intermediaries, capital expenditure planning and your supply chain.
Key lessons from the VAT implementation:
The key ‘lesson learned’ from VAT implementation experience is that businesses who began planning for the implementation project early had successful implementations and were ready on go-live date. An early start enabled them to:
- Facilitate early management responses to issues where guidance from senior management was required which enabled early resolution of issues.
- Identify IT systems impacted by VAT implementation and assess the level of upgrades, modifications (or new acquisitions) required. This in turn enabled them to accurately budget for the project and secure scarce external IT resources for the project’s IT work stream.
- Decide on hire the right VAT implementation specialists
- Identify the necessary head count and skills set to deliver a successful and timely project.
- Identify any adverse impact from VAT laws on the business. This in turn enabled them to approach and raise the issue with the tax authorities early. Businesses in such situations had a far higher chance of receiving responses from the authorities (as opposed to those who made submissions 3 months out from VAT go-live date).
- Plan their capital expenditure and cash flow management.
- Manage the risk of a late announcement by the Government providing a shorter time span to implement the tax.
- Address (and renegotiate with counter parties) long term contracts adversely impacted by VAT. These are some of the critical success factors to consider to ensure a successful implementation of the tax.
