VAT effect on business

1-Effect on business core operations

Implementation of VAT will come with some challenges for the corporate world, particularly for those who have no experience with VAT administration before. Beside of increase in administration cost, businesses will need to consider how VAT will affect core operation model including technology (financial software), pricing structure, supply chain arrangements and other relevant sections. 

Companies need to focus on the following specifically:

-How it will affect future cash flows of the company.

-Deciding how much of the VAT cost they want to shift to the consumer.

-Ensuring a safe and secure invoicing process, so it will accurately calculate and record the necessary data required for VAT compliance and implementation.

The impact of VAT on business will also depend upon the organisation structure and industry. For example, if a company have branches in multiple GCC countries. It would want to plan to implement the tax in a best possible way if the VAT is not implemented simultaneously in the other GCC countries. It is essential for companies to reassess their contracts of goods and services if these contracts VAT payment risk is allocated appropriately.  Moreover payment obligation will be exclusive or inclusive of VAT in that case where a contract is silent on the matter.

VAT on property

As UAE government is under the process of drafting the complete UAE Tax Law so it still unknown how much the personal transaction will be effected after the implementation of VAT. Currently, there is no guidance of VAT on property transactions but if UAE adopted the model of UK and Europe, it could be expected that new build commercial property will be eligible for VAT. Before the release of VAT implementation, these debates are tentative but however imperative for corporate planning purpose.