Half of UAE businesses are not ready for VAT

"Ministry of Finance has announced that some small businesses will be safeguarded ... for this initial phase"

(Image: flickr/Ken Teegardin)

(Image: flickr/Ken Teegardin)

A total of 52 percent of UAE-based businesses surveyed by Hays say they do not have a VAT implementation strategy in place for the January 2018 deadline. What is perhaps most surprising is that 60 percent have not assigned a budget for the change.

The survey found that the majority of organisations plan on implementing VAT without increasing headcount spend, with 61 percent introducing the new laws using their existing workforce. Of those who have set a budget, the most common is up to AED100,000 – the smallest bracket spend given in the research, and only 5 percent expect to spend more than this.

“With UAE VAT law yet to be fully announced, it is difficult for businesses to anticipate exactly how they will implement VAT and the subsequent costs involved. What is clear however, is that organisations need to be understanding the implications now and realising that the introduction of VAT is not just a finance issue. Key support functions, such as IT will certainly be affected, as well as operations,” says Chris Greaves, Managing Director of Hays Gulf Region.

In support of this, about a quarter (27 percent) of organisations expect to hire non-finance staff, most commonly being IT (29 percent) and Supply Chain (13 percent) professionals.

When comparing organisations employing more than 1,500 staff against those with workforces of less than 250 employees in the GCC, the survey found clear trends associated with their relative readiness and spend assigned for VAT implementation. Of larger organisations, 73 percent have a strategy in place, 7 percent have a budget of more than AED 100,000 for implementation and over half (53 percent) anticipate hiring non-finance staff. This is in contrast to 42 percent, 3 percent and 23 percent respectively for smaller organisations.

“This correlation is not overly surprising for two reasons. Firstly, the larger organisations, typically multi-national companies, are well practiced in the processes and procedures around VAT, having implemented practices and paid it in other geographical locations. They are therefore at an advantage for implementing here in the UAE and can better anticipate the level of expertise, budget and planning required.”

“The second reason is that the Ministry of Finance has announced that some small businesses will be safeguarded from VAT for this initial phase. However, which organisations will fall into this threshold is so far unknown. What is clear, is that no organisation is completely exempt from the effects of this new era of change. Regardless of size, organisations will need to be extra stringent on their reporting processes and practices and organisations should be gearing up now ready for the 2018 rollout. We are already seeing an uplift in the demand for tax specialists across all size of organisation in the region and we anticipate this to increase in the coming weeks,” says Chris.

More than 100 senior decision-makers and finance professionals, operating within both public and private sector organisations across the UAE, were surveyed online from February to April 2017. The findings have been compiled into a short report, providing a snapshot on how companies in the region are preparing for the implementation of VAT.

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