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IT channel awaits for VAT legislation and guidelines

Delay in publishing legislation and guidelines for January 2018 VAT deadline is hampering resellers’ business software preparedness

IT channel awaits for VAT legislation and guidelines
White says it takes between 9 to 12 months to make the transition after the legislation is released.

In the wake of the Gulf Cooperation Council (GCC) countries agreeing to introduce value added tax (VAT) in January 2018, the local IT channel has said the delay in publishing VAT legislation and guidelines is hampering their businesses software preparedness.

It is expected that the UAE and few other GCC countries will implement VAT with effect from 1 January 2018 and the rest within 1 January 2019. Though VAT has been implemented in more than 150 countries across the world, it is different in its impact and operationalisation in every country.

Aaron White, regional director, Sage Middle East said one of the important milestones in the transition process of VAT is the publishing of the legislation by the government. White said along with this, the government is also expected to release various guidelines and other documentation which is extremely helpful in starting the preparation of the software preparedness.

"VAT is a new concept in the GCC with virtually no awareness levels. Therefore, the business and the government needs sufficient staff to be trained and this takes time along with changes required to be made in the processes and IT infrastructure," he said.

White said it takes between 9 to 12 months to make this transition after the legislation is released. "For countries in the GCC intending to implement VAT with effect from 1 January 2018, we would like to see the legislation released as soon as possible. We would also expect that the detailed guidelines are released along with the legislation in order to ensure that the transition process is smooth and without any glitches," he said. "Our strategy is to expand and empower the channel."

He said Sage has planned to expand the channel by recruiting new partners in the entire GCC. "The recruitment process has started for various product segments across the GCC," he said. "Existing enterprise resellers, accounting and audit firms, account processing companies are our targets. We plan to double the channel partners in the ensuing year."

White added that on the subject of empowerment, Sage is planning to do it in essentially three steps namely awareness on the subject, training partners on the solutions and customer training to ensure that the transition is smooth. "In the first stage, it is about increasing awareness on VAT, which has already started," he noted. "The next stage of the engagement will start around the time that the UAE legislation is released and incorporated in our software. At this stage, there will be detailed trainings on business process changes required to implement the modified software in the customer establishment. This will include an accreditation."

In the third stage, according to White, it will be the implementation of the changed processes on a test system, testing the changed processes and finally going through the transition date. "This is a proven rigorous process to make a smooth transition for our customers," he said.

Vasant Menghani, founder and CEO at Dubai-based Touchmate, a maker of mobile devices and IT accessories, said while the motivation to introduce VAT in the GCC is a rational one, the downside is that the tax will take away the very appeal that has made this bloc to grow much faster than other regions in the wider Middle East.

"If you take the UAE and in particular Dubai, it's the shopping destination for many holiday and business tourists from Europe, Asia and Africa that come to buy consumer electronics and IT products here because of the low customs duty," he said. "In fact, at present, some of the IT products, consumer electronics, telecommunication products, PCs, printers, components and IT accessories sold in the market are exempted from customs duty."

That said, Menghani pointed out that: "I have no doubt in my mind that it [VAT] will bring accountability to the whole IT industry. From vendor, IT distributor and channel partner, they will all be required to account for the VAT based on the sell-out of IT goods and services that will fall under this tax regime."

Earlier this week, Arabianbusiness.com reported that a total of 52% of UAE-based businesses surveyed by Hays said they do not have a VAT implementation strategy in place for the January 2018 deadline. What is perhaps most surprising is that 60% have not assigned a budget for the change.

The Hays survey also found that the majority of organisations plan on implementing VAT without increasing headcount spend, with 61% 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% expect to spend more than this.


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