By Jamie Goodwin
Business-owners urged to assess impacts of new taxes ahead of go-live date
GCC companies have been urged to be ready for the implementation of a value-added tax (VAT) system in the region.
The GCC Ministers of Finance met in Jeddah on Thursday to approve in principle the Value Added Tax (VAT) and Excise Tax treaties.
The Excise Tax system is expected to be implemented by January 1 2017, with VAT expected by January 1 2018. Some administrative matters such as tax on intra-GCC trade are yet to be resolved.
But firms should prepare for the implementation of the system before it goes live, according to Jeanine Daou, PwC’s Middle East indirect taxes partner.
“Companies should take action now, if they have not already, to prepare for the implementation of the new tax systems and be ready by go-live date,” she said.
Firms should start assessing the potential impacts of the new taxes on the business, including on margins and cash flow, said a PwC statement. Businesses should also prepare for obligations including charging, collecting and paying taxes on time.
"The introduction of VAT and Excise Tax constitute an important policy reform aiming to help GCC Governments achieve medium to long-term social and economic policy goals and reduce reliance on hydrocarbon revenues,” said Daou.
“Approval of the treaties is an important development as it sets out common principles that will guide the application of VAT and Excise Tax at a national level by each individual Member State.”
VAT will be collected on transactions involving the payment of certain goods and services. GCC countries agreed that the tax should not be applied on industries such as education and healthcare. Staple food items would also be exempted from VAT.
Excise tax is levied on specific merchandise or products once during import or production stage.
The formal announcement of the VAT and Excise Tax treaties is expected in the last quarter of 2016.For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.