If we were to ask anyone at the beginning of this year, what they were doing about the upcoming VAT? There would be a counter question – Is this really happening? In this market? Are they really serious?

Fast forward four months and the VAT Framework Agreement was signed with indications of the VAT being in place by 1 January 2018.

Fast forward a few more months and the first tax procedures law came through, and likewise slowly and steadily, the legislations and the governing bodies are being created and being appointed. It seems like this may in fact actualize.

The sentiment has gradually picked up and companies are now embarking on implementing VAT. People are talking, managements are acting, systems are evolving. However, since the final regulations are still not out, a few companies are yet to embark on the initiative and are waiting to see whether VAT will get delayed or not.

The way we see it, VAT is here to stay and will be implemented on 1 Jan 2018. The UAE Government is fairly clear on their intentions and have signed up the country as one of the pioneers of this taxation system in the GCC along with Kingdom of Saudi Arabia.

The authorities may be lenient initially – given that the knowledge base will be low and companies will need advisory to get it right. But the authorities will not delay the implementation and there is a very simple logic to it. The easiest way to implement VAT is to ensure the larger companies have implemented VAT. When those larger companies make a supply to a medium sized company, it has 2 options:

  1. Either to register as a VAT company; OR
  2. Absorb the expense (a non registered company cannot pass on VAT to its customers)

If it chooses to absorb the expense, it bears an additional burden in today’s economic situation. If it chooses to register as a VAT registered entity, problem solved! You can expect a similar concept of trickle down compliance till it reaches the micro sized company.

All said and done, we think the most important thing for any business is to be prepared for the worst. So even if you have an inkling that this may delay or authorities may be lenient, the best way to move forward is to prepare in advance; come what may. And now is the time – we’d like to believe 75% of the information is already available for businesses to begin the evolution of the future.

Go on then, lean to the future!