The GCC states are developing a broad framework for the introduction of VAT. The framework agreement will set out the underlying principles of VAT laws for the six GCC countries, although there are likely to be areas where member states will have some flexibility.
An announced start date of 1 January 2018 may seem a long way off but our experience in countries including Australia, Singapore and Malaysia suggests this is a tight timeframe within which to prepare your business.
While VAT is not intended to be a tax on business, collecting the tax and remitting it to the government will have significant compliance costs. There could also be cash flow implications. Supply chains need to be reviewed to understand the impact of VAT. VAT costs and accounting obligations will need to be identified so they can be addressed. There are also implications for IT systems. Adapting to VAT will mean updating or upgrading ERP and IT systems and interfaces to correctly capture input and output VAT. Governance frameworks will also need to be reviewed and updated to ensure policies, processes and controls comply - a continue to comply - with VAT legislation.
We are now in a live VAT environment where every transaction has a consequence. It is likely mistakes will be made; the difference will be how these are managed and reported.