As the prospects of a federal corporate tax and value added tax regime in the UAE gain momentum, organisations need to review a number of aspects including financial systems to assess their overall tax readiness and address possible changes to their own accounting systems, says global audit and advisory services firm KPMG.
Dubai, 20 October 2015: The firm held a tax seminar for its clients and industry stakeholders on the ‘Changing Tax Landscape in the UAE’ to offer insights on how businesses can prepare themselves for impending tax-related legislations. Over 150 key stakeholders from the business community in the UAE and GCC attended the seminar.
Discussions on a federal corporate tax regime have been ongoing since 2005, with the IMF and World Bank trying to persuade Gulf nations to reduce subsidies and find other sources of revenue.
Nilesh Ashar, Partner – Head of Tax, KPMG in the UAE said: “While it may be premature for businesses to start making widespread changes to supply chain functions or to operating and business structures, there are a number of measures that companies must start to actively consider even prior to the introduction, in order to effectively transition to a tax payable environment.”
Some of these include modelling the fiscal impact of taxes in business plans by making reasonable assumptions, reviewing intercompany arrangements to determine the basis of cross – charges ( or lack thereof), reviewing contracts to assess current position of tax clauses, analysing financial systems to assess overall readiness, and also reviewing the potential impact of taxes on supply chain and operating structures.
Ashok Hariharan, Head of Tax for KPMG Middle East and South Asia region, adds: “We encourage all UAE organisations to continue monitoring tax developments and updates, and model the financial impact of corporate tax and VAT in their business plans. Internal stakeholder communication and awareness is also key, as both corporate tax and VAT will likely impact other functions of the business such as, finance, legal, IT, strategy etc.
Once the legislation has been established, firms will have to prepare an implementation plan up to the end of the first year to test all tax compliance aspects and get ready to train, hire and develop resources in order to be tax compliant.”
“KPMG will continue to engage with businesses to provide regular updates on developments related to the introduction of corporate tax and VAT laws in the UAE,” said Nilesh Ashar.
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The views and opinions expressed herein are the personal opinions of the interviewees and authors based on their personal experience working as Auditors in the industry and do not necessarily represent the views or opinions of KPMG International or any KPMG member firm.