In the rapidly evolving legal environment of the GCC, the introduction of VAT is the hottest of hot topics up for discussion. Since the announcement, businesses have been getting ready for the implementation of VAT across the middle east. But while there are dozens of things you need to think about, there is one thing many businesses may have overlooked. The introduction of VAT doesn’t just affect your business operations, prices and marketing – it also affects your IT infrastructure.
What Do We Know?
To date, only the government of the Kingdom of Saudi Arabia has announced their approval of the VAT Framework, with other GCC nations likely to follow soon. While there is a lot of speculation in the market about the new framework, there are a few things we do know, thanks to an announcement by the UAE Ministry of Finance:
- Saudi Arabian Ministry officials have indicated that the VAT regime will be applicable from 1 January 2018 and likely that UAE will be implemented on the same date
- The standard VAT rate is likely to be 5%
- Businesses will need to be VAT registered. The UAE Ministry of Finance has confirmed that registration is expected to be available 3 months before the launch of VAT, and businesses will be able to register online
- Businesses will need to complete and submit VAT returns to the government on a regular basis, with the expected frequency of every month or 3 months based on taxable revenue slab
So with all this in mind, what IT changes will Middle Eastern businesses need to make if they want to be prepared for VAT?
Businesses that work with automated software in any way will need to update them. Automated software processes are fantastic for removing the human element and reducing error rate, but they are even better at ensuring compliance with complex regulations. So when the new VAT legislation hits your area, your business will need to update their automated processes to include the new VAT laws in the mix. This update will span over your invoicing systems, accounting processes and internal controls, making sure you are fully VAT complaint in all areas of business. However, this could be a long and lengthily process, with the potential to cause problems in other areas, which means you need to be preparing now so that those problems can be dealt with before it goes live.
2. Invoicing Systems
Of course, your invoicing is one of the primary systems that will need to be VAT compliant. You need to ensure that your business is charging the correct rates of VAT to every customer the day it becomes legally required. That means your IT infrastructure will need to be adjusted to enable the correct VAT coding of invoice generation, accounts payable and receivable transactions with appropriate internal controls and processes, all of which are VAT compliant across all business functions.
If you are implementing new systems or upgrading old ones to encompass VAT functionality, then you will need to train all users in how to operate these systems. This not only functions as a test for the new systems, but means there will be no surprises when the new procedures hit. But if you have new systems put in place by an external contractor, you need to consider who will administer this training to your users, at what time.
4. Resource Strain
Of course, adding a large extra function into the mix can cause a strain on internal resourcing. So before VAT becomes mandatory, you need to consider whether you will need to hire additional staff to maintain VAT records and handle filings, how much extra resource each department (including IT) will require to prepare for and implement the new change, and where that resource will be coming from. The last thing any business wants is to allow VAT to negatively impact their business because they weren’t prepared for it.
Why Work With Invenio?
Of course, you don’t have to do it alone. At Invenio we have consultants in the region to help you prepare. Not only that, but we are currently designing and implementing the VAT and Excise for General Authority of Zakat & Tax’s (GAZT) new IT system, which will help them handle the VAT implementation from day 1. Thanks to our inside knowledge and wide breadth of experience, your business can rest easy knowing that you are 100% compliant, have a reduced risk of audit and have the opportunity to develop an approach that uses efficient savings and reductions across the board. For more information, or to enquire about preparing your IT systems for VAT, get in touch with one of our experts today.