Gulf VAT 7 planning issues

From the 1 January 2018, the six Gulf Co-operation Council (GCC) states will implement 5% VAT.  The six countries are: Bahrain; Kuwait; Oman; Qatar; Saudi Arabia and the United Arab Emirates.

Whilst legislation for the indirect tax has yet to be published, local businesses, and companies selling into the region, should review some of the following steps:

• Scope out all operational and finance areas that will be affected.  This should include consultation with representatives from: tax & customs; finance; IT; procurement; sales; supply chains and IT.
• Assess VAT cost implications on all major transactions, and identify possible delayed or non-recovery of VAT areas
• Assemble an implementation team from the above areas to prepare detailed plans for adapting to the new tax regime, including summary plans for review and approval by the Board.
• IT and ERP systems should be audited and updated - against approved costs - to cope with the requirements of VAT reporting and payments.  This may require outside consultancy and assistance from, for example, tax engine providers.
• Assess staff knowledge and experience of the likely VAT requirements.  Compile a training program, including reviewing the need for outside consultation. A staff VAT guide and training programme should be drawn up.
• Update the chart of accounts, including creating the appropriate VAT codes for the use of the correct calculation and reporting of VAT.
• Assess VAT compliance requirements, including invoice disclosure obligations.
• Review existing major contracts to assess the likely impact of the imposition of VAT.  This should include sales, purchase and fixed assets supplies.  Consideration should be given to any contracts where the introduction of VAT may be considered a force majeure. This may nullify the terms of the contract.

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