The UAE has announced it will proceed with the implementation of a value-added tax (VAT) regime, which is planned to come into effect on January 1, 2018.

It is expected that the rate of the VAT will be 5% on all goods and services, with some exceptions including basic food items, health care and education. The new tax will not be limited to the UAE, but rather will be implemented across the GCC countries, although possibly at different rates and different implementation dates.

The implementation of VAT will come with some corporate challenges, especially for businesses which have not previously been exposed to the nuances of tax compliance.

Aside from having to accommodate for additional administration costs, companies will need to consider how VAT will affect their operating models, including supply chain arrangements, financial systems, transition periods, end customer pricing and other relevant areas.

Organizations should specifically focus on: Examining the impact of VAT on each stage of their supply chain with relation to transactions, whether they be inter-company or external services; Determining how the introduction of the VAT can affect cash flow; Deciding how much of the VAT burden they would like to pass on to the consumer; and Ensuring robust internal documentation processes (for example invoicing) to correctly calculate and capture the necessary information required for VAT implementation and compliance.

With more than 25 years of experience in management, taxation and financial services our consultants could help your company with UAE tax compliance with professional integration and implementation of VAT accounting processes in your company.