On January 01, 2018, UAE joined the global tax arena by implementing VAT across the country for the first time in history. The journey so far has been revealing, to say the least. However, now that we have crossed the 100 days of VAT implementation in the country, it is time we look back and see what we have learned so far and what to expect in future.
Despite all the publicity and awareness campaigns taken in advanced, many businesses found themselves ill-prepared to brace the change. We saw various businesses missing the VAT registration deadlines, while many found it hard to generate VAT compliance data for their business operations. Some of the most prevailing business concerns highlighted during the first 100 days included technology glitches, lack of awareness of VAT compliance and customer inquiries. Perhaps the biggest blip for various businesses was the inability to generate VAT compliance invoices, which translated into administrative, financial, and reputational issues.
Accurate and complete VAT Return Filing was another milestone that we saw during the first hundred days. The large businesses with monthly VAT Filing period had been through the process multiple times, whereas businesses with quarterly VAT Filing period filed their first Return at the end of April. The process of VAT Return Filing was challenging for the majority of businesses. Most businesses were unprepared to provide all requisite details for VAT Returns. Now most of the businesses are done with their first VAT Return Filing, they can better assess their compliance preparation levels and take measures to avoid financial and reputational burden onto them for failing to comply.
The complexity and scale of business operations are the prime determinants of best practices that can help businesses comply with VAT guidelines issued by Federal Tax Authority. For complex and large businesses in-house or co-source VAT Managers will do the trick, while for smaller businesses with linear business operations, outsource VAT Managers represent the best practice.
Here, finding the right VAT Manager is crucial. The person should be an individual with practical industry experience, a global perspective and complete knowledge of VAT guidelines in the country. Typically, the candidate will work at senior management position with junior support.
Beyond the 100 days, we expect to see increased inquiries relating to VAT and Audit from Federal Tax Authority. In fact, FTA has already asked submission of relevant documentation from businesses. To avoid hefty penalties for non-compliance, businesses need to implement health-checks, and VAT reviews, to be able to identify and correct any discrepancies voluntarily before they are caught by FTA. Furthermore, it is time businesses start preparing for impacts of VAT implementation across remaining GCC region. This may include but not limited to the identification and reporting of transactions from these GCC countries for VAT purposes.
It’s just the beginning of a new era as we see the rise of Financial Management and professional service consultancy. The mistakes are likely to happen at initial stages; however, it is the experience and professionalism of professional firms to take hold of the matters and deliver VAT compliant documentation to businesses in the country.
