Gulf VAT challenges
- 16 February 2017 | Richard Asquith
Governments and companies in the six Gulf states are getting ready for the implementation of Value Added Tax from 1 January 2018. The new consumption tax has been set at 5% across the region, with agreement on harmonised rules to boost trade.
There remain several obstacles ahead for businesses, including:
- A lack of local expertise in VAT
- There is still no legislation published which makes for an extremely tight timetable
- Investment in IT and ERP system up-grades to manage VAT calculations and reporting
- Varying intra-state VAT co-operation which could impact businesses providing goods are services within the region
- For highly competitive industries, companies may not be able to pass on to the final consumer the full VAT charge, meaning a hit to profit margins
- For exempt goods or services, there will be the irrecoverable cost on input VAT suffered
- For all sectors, the imposition of VAT will reduce incomes and consumer spending power
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