VAT in UAE: With a month to go, the clock is ticking

Majority of small enterprises have now come to a realisation that value-added tax (VAT) will not be deferred and are now rushing to implement it in order to catch up with the January 1, 2018 deadline, experts revealed in Dubai on Saturday.

Though it's just one month left, tax experts in the UAE believe that time is still on their side to meet the deadline as they don't operate complex systems.

They revealed that large corporates are much ahead in terms of preparedness compared to their smaller peers who were under their self-imposed impressions that VAT would be delayed or postponed and didn't initiate the process.

Mayank Sawhney, director at MaxGrowth Consulting, said that in terms of readiness or time preparedness, large corporates had started the process much earlier.

Replying to a question about which potential sector could lag behind, he said: "I would put the financial sector because they have too many things to segregate. They are not fully ready but the process is still going on and everyone is waiting for the executive regulations to be formally implemented. What is pending to a great extent is the implementation part, such as contract drafting, IT implementation and how tax returning form would look like because executive regulations have not yet been released. So, all those systems are pending."

"From large corporates' perspective, they are 50 to 60 per cent ready and 40 per cent of work is to be done. For SMEs, they are largely unprepared; at the most they have done is VAT registration. They have not done the VAT impact analysis. Once that registration process is over, the SMEs will be rushing for the VAT implementation. I think, for SMEs, a one-month period is good enough to make themselves ready."

Sawhney was speaking at the 'VAT Clinic' organised by the UAE's leading newspaper, Khaleej Times, in partnership with Qadi Accountants and the Institute of Chartered Accountants of India (Dubai Chapter).

Qadi Accountants (QA) is a boutique advisory firm that provides services ranging from audit, accounting, advisory and taxation.

"Our team focuses on steering organisations to the path of financial discipline. With the advent of VAT in the GCC and keeping our core ideology in mind, QA had the prestigious opportunity to partner up with the ICAI and Khaleej Times to support the introduction of the unique concept VAT Clinic, which will assist the professionals in the industry to find solutions to complex scenarios surrounding VAT," said Abdul Haseeb Kazi of Qadi Accountants.

"QA aims to create more awareness and provide clarity through its advisory division by addressing issues from registration to technical aspects. The VAT Clinic will provide Q&A platform to provide such value addition in the market," he added.

The UAE, as part of the GCC agreement, will implement five per cent VAT from January 1, 2018 and more than 300,000 companies are likely to register with the Federal Tax Authority.

Earlier, Vinay Kamat, Editor of Khaleej Times, welcomed the audience to the VAT Clinic, saying such dialogues will continue throughout the year with the ICAI and other organisations.

Teething problems
"As a consultant, we have seen that most of the companies in the SMEs or large segments had started applying especially when two press releases were issued in the last two months to register within a given time frame and most of them have gone for registration," said Pratik Shah, partner at Dhruva Advisors.

He noted that there would be teething problems for companies and such issues can't be anticipated reasonably in advance until companies begin the practice and go live with the system.

"The SMEs were sceptical some time back whether VAT will come or be deferred. And they themselves had taken a call that it might get pushed back which is not reality. If you look at the FTA's website, it has been running a ticker of how many days have been left and has been regularly organising workshops to inform and update. Therefore, the SMEs will find it challenging to some extent in terms of quick compliance but they can still accommodate in the next 30-day period because their businesses are not that complicated. Globally, the UAE has one of the simplest taxation happening here," said Shah.

Naveen Sharma, chairman of the ICAI, said people are looking for clarification and answers related to the industries they are working in.

"People want to know what and how it will impact them as a company. When VAT is coming, a lot will change so they want to know whether they are in line with the regulations. In terms of preparation of individual companies, there is a lot to be done now. People have not started preparing well in advance in spite of the government giving them almost one-and-a-half year time. They are now rushing when it is becoming reality. Late preparation is causing the panic," Sharma added.

90% clarity is there
Pavithra Balaji, statutory and tax operations leader for Menat & SSA at GE, noted that the FTA had shared critical components for companies to get ready and now there is a very minuscule amount of clarity that is needed. "There is enough information from the Federal Tax Authority for us to get ready ahead of January 1, 2018."

Nirav Shah, director of Fame Advisory, noted that the firms "can't blame that we don't have executive regulations and we should not get ready for that. Honestly speaking, 80 to 90 per cent clarity is there. Of course, there will be finer areas that will never be clarified. In any tax law, it is never black and white; there are grey areas whether it's matured economies or new entrants into taxation system. There are issues which will be open to interpretation. The volume and transactions are straight forward. There will be small nuances but that will not change the entire positions. Therefore, it is absolutely imperative to start preparing."

Anish Mehta, secretary of the ICAI (Dubai), said no authority has done so many workshops prior to implementation of VAT as done by the FTA.

"So many queries have been resolved through these workshops and also through various institutes like the ICAI which have taken the responsibility to educate as many people as possible. We have more than one month and it's ample time for SMEs because their IT systems are not that complex and the human resources are easy to get - especially a lot of chartered accountants are flying from India with good Goods and Services Tax implementation experience."

With respect to legislation, Mahmood Bangaram, vice-chairman of the ICAI (Dubai), noted that "there are ambiguities and arguments even after 50-100 years related to mature laws such as corporate regulations. Because the VAT issue is new to the entire country and the region, there is a little hesitation."

- waheedabbas@khaleejtimes.com