To be precise, the introduction of VAT in the Gulf nations will not just affect consumers; it will also have a broader impact on businesses as well. As the Gulf nations are all but ready to implement VAT, it’s time to take a closer look on the way VAT will affect businesses here. According to some businesses, they will require more time to get accustomed to this new tax regime. On the other hand, they are also of the opinion that it is high time that revamp their financial and accounting systems to comply with the new VAT systems.
It is a part of a Systematic Change
Besides the excise tax which is already present, the UAE will introduce a 5% VAT alongside Saudi Arabia as the first among GOC nations. As per most of the prominent businessmen, the first people who will benefit at the implementation stage will be the students and the bankers. However, most people are of the view that lawyers and other professional service companies will be offering their advice and on top of that will charge VAT on their services.
VAT Impact on Local Sales
All local sales will be subjected to the standard rate of 5% unless the goods or services are under exempt categories. Note that 5% of VAT has to be calculated on the value of goods after price reductions and discounts. Moreover, the taxable person has to issue a tax invoice latest by the 15th day from the end of the month.
VAT Impact on Exports
All exports outside the GCC will be zero rated and 0% tax will be levied on the export of several goods. But note that exports to the GCC nations (who have already implemented VAT) would be treated in a different manner. However, it will depend on whether it is sold to a tax-registered entity in the buyer state.
What Business Owners Need to do?
The business owners need to address deficiencies which should result in a more cost-effective supply chain. As VAT applies to each cycle of the supply chain, business owners have to take care of them accordingly. Those that operate in other GCC nations have more tasks to undertake. It is because VAT is also being considered as a region wide system. Businesses and merchants will need to incorporate VAT in their accounting systems.