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Regional channel urged to look at VAT implementation as an opportunity

Industry stakeholders advise partners to get trained and play leading role in raising awareness and providing consulting services to customer in the GCC

Regional channel urged to look at VAT implementation as an opportunity
Experts Computer Group chairman Shailendra Rughwani says the Dubai Computer Group has has already started educating members on VAT

As the GCC readies to roll out value-added tax (VAT) from 1st January, 2018, the regional channel has been advised to look at the implementation as a great opportunity for the channel, specifically those who can quickly upgrade their skills and understanding how VAT will impact and deliver a working solution to businesses in various industries.

Although the legislation and guidelines are yet to be released, the policy for the tax implementation has already been approved by leaders of the GCC countries comprising Bahrain, Kuwait, Oman, Qatar, Kingdom of Saudi Arabia and United Arab Emirates.

While each GCC country is still hammering out final legislation details and guidelines of rolling out VAT in the regional bloc, they have agreed that the tax will not be applied on certain sectors like education and health care.

For IT vendors, distributors, resellers and systems integrators that provide hardware, software and IT services to this market, time to start preparing and assessing the broader impact the introduction of VAT will have next January is now.

Aaron White, regional director, Sage Middle East, said VAT is a consumption tax which is levied on the value add, as the goods and services move in the value chain. White said VAT, as its very nature, has a neutral impact on the business while being borne by the end consumer.

However, he explained that there will be an impact on businesses which are exempted and competitive industries which will not be able to pass on the VAT entirely to the consumer. "An example is the electronics and communication business in the GCC, which may lose some of its competitive sheen vis-a-vis other countries in this region," he said.

White pointed out that although the business acts as an agent to collect and pay the tax on behalf of the government, businesses will have to invest in resources and systems in order to improve the processes so that the input tax credits are actually availed of and does not become a cost. "Also, the compliance environment will improve noticeably, which requires that resources are trained and updated on the legislations which evolve in the first few years along with the IT systems," he noted. "The IT channel business will also undergo these changes. The regional channel has to play a pivotal role with the responsibility of bringing about this change in improving the compliance and accounting environment in this region. There is no doubt that this will open up opportunities for solutions providers that get trained."

Shailendra Rughwani, chairman at Dubai-based Experts Computer Group, agreed with White on getting trained and said the regional channel will have to be fully prepared as there will be no scope of error.

Rughwani added that apart from getting the staff trained, the cash flow part also needs to be taken care of. "As Experts Computer Group, we have started preparing for the upcoming VAT in UAE," he said. "We have discussed with our ERP solution provider to upgrade our accounting software to accommodate the VAT roll out in January 2018. Once the upgrade is done, we will also be having training for our accounts team for the accounting software and also with our auditors who are experienced in VAT implementation."

He explained that being a Dubai Computer Group (DCG), he was happy to see that the local IT trade body has already started educating members on VAT. "DCG has conducted one seminar for the members and had invited VAT specialists to speak about VAT to tall members so that they can better understand and start to implement in their businesses," he noted. "DCG has also had meetings with Dubai Customs and Department of Economic Development and other relevant government departments."

With the mandatory registration limit for the UAE set to AED 375,000 turnover in any 12 months for mandatory registration and half of that i.e. AED 187,500 turnover as the optional registration limit, a large number of companies will be covered, pundits say.

Sage's White pointed out that it is also important to understand that, for the business, it would want to register and avail of the input credit, the government disallows smaller companies to register. "In Malaysia, which is the latest country to implement VAT in 2015, the actual company registrations were almost four times the initial estimates of the number of companies that will register," he said.

White added that if you consider GDP as the benchmark to compare the size of the opportunity, the GDP of Malaysia is $296bn vis-a-vis $1.4trn combined GDP for the GCC countries, which is close five times. "I believe it is an opportunity for our channel and for those who can quickly upgrade the skills on how VAT is delivered. Being a channel driven business, we are empathetic about this requirement," he said.

White said that although the legislation is not yet published, Sage has started to engage with its channel partners to share what VAT is and the implementation considerations including how it can be delivered in an accounting and business management solution. "At this point, the purpose is to improve VAT awareness of consultants in the channel," he said.

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