Businesses need to gear up for introduction of VAT: Expert

 07 Jun 2016 - 0:35

Businesses need to gear up for introduction of VAT: Expert
Craig Richardson

 

 

DOHA: As the Gulf Cooperation Council (GCC) countries come closer to implementing value added tax (VAT), it is important that the country’s businesses and organisations realise the importance of preparing for the significant impacts that VAT will have on the business environment.
To help companies navigate through these complexities, Craig Richardson, Partner and Head of Tax at KPMG in Qatar hosted a VAT seminar on June 5 in Doha for over 100 senior finance professionals from some of country’s leading businesses.
By the end of second quarter of 2016, all GCC countries are expected to sign a framework agreement to introduce VAT at a rate between 3-5 percent.
Draft legislation is then expected in the following months, providing practical guidance and executive regulations regarding new VAT law.
“Once rolled out, VAT will affect sales of goods and services in Qatar with limited exemptions and consumption tax relief. However, there will be a right for businesses to claim credit for VAT paid on their expenditures relating to their business activities. Therefore, it is important for businesses to start reviewing and considering their business models to offset this anticipated change,” Richardson said.
Although implementing VAT will increase the cost of doing business, revenues gained from VAT will be ploughed back into the economy.
This will also contribute to enhancing the overall business conditions, while maintaining the country’s position as a business friendly hub.
The region has long been considered an attractive low-tax environment. Generally, the introduction of a broad based VAT at a low rate is unlikely to deter investment into the country, or the GCC Region. The appeal of the region stretches much further than its low-tax status. Infrastructure development, access to high-potential growth markets in Africa and Asia, free-trade zones, competitive labor costs, few trade barriers, no exchange controls with USD pegged currencies, as well as economic and political stability, are all factors to be considered.
Richardson also confirmed that the implementation of VAT at a low rate will not have a recurring inflation impact unless the VAT rates are increased. Some businesses may choose to absorb the VAT cost, wholly or in part, to limit the impact on consumers.

The Peninsula