Discussing with my wife about where we could go for our Wedding Anniversary is never an easy task. The heated discussion of where we have been before, how much it’s going to cost and more importantly where we are going to celebrate always come up and it’s usually differing destinations that we want to go to…
As we were discussing a few of the destinations we hadn’t been to before, I was searching the internet for some inspiration. Dubai was a destination that came up. We have been to one of their Emirate neighbours in the past (Abu Dhabi) for our honeymoon and I remember it with fondness.
I thought this was a great idea, but as I began researching the internet for hotels and flights, I stumbled across an article regarding VAT changes to be implemented in the Middle East. Intrigued by the article, I started reading about it and dug deeper. Once finished reading, the thought occurred to me the impact these changes would have, not only on the Middle East, but also the challenges our clients would have to face when implementing the changes in their systems. Then I considered what these changes in the rules of VAT would mean to them if they did business with those countries, but also if they had offices in the Middle East Region.
What is happening – The GCC (The Gulf Corporation Council) which is made of the following Emirate states; Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates will be implementing VAT in their states. The GCC Financial and Economic Cooperation Committee (formed by the GCC) are currently in the process of approving the common legal framework for VAT. The framework will form the basis for a national VAT system that will be implemented in each of the GCC states. Each member state will be required to issue its own national VAT legislations and will have the authority to determine specific VAT rules in certain areas. The objective of the common VAT framework is to introduce a standard, fully-fledged VAT system in each member state.
All states have been given a one year implementation timeframe to have these systems in place and the VAT rate to be applied in all states will be 5%.
Requirements – In terms of registering for VAT, currently the requirements are:
- Businesses that meet a minimum of AED 3.75m (Around GBP 800,000) of annual turnover must register for VAT.
- Businesses that meet the criteria between AED 1.78m and AED 3.75m (GBP 375,000 – 800,000) are voluntary for registering for VAT.
Key dates and when is this happening in this journey:
- October 2016 – Meeting of the GCC Financial and Economic Cooperation Committee. This is where the VAT framework was agreed.
- 1st January 2018 – The implementation of VAT commences from this date.
- 1st January 2019 – Deadline for VAT to be fully implemented in each specific region.
What does it mean for our clients: The changes in the rules in relation to VAT has a significant impact on our clients who do work in the Middle East and have offices based in these locations. As seen with the EU VAT Validation rules put in place over five years ago, for any businesses that meet the criteria, they will need to register for VAT in the specific states in which they are located, but also their customers in these regions will need to provide them with VAT registration numbers. These will need to be validated by the VAT authorities. This will also have a significant impact on the way our customers invoice their clients going forward in our systems.
VAT configuration will need to be implemented for these entities and changes to our invoice and credit note templates will need to be actioned as our customers must charge VAT on services supplied.
From a GL perspective, new accounts will also need to be created for VAT purposes as all financial transactions need to be recorded and reflect the changes made to VAT. There is also a potential knock on effect on our clients in relation to how they report for their Middle East offices.
It will also have an impact of time management and manpower for our clients as an additional project and will impact the day to day running of their current processes.
What can we do to help: Helm360’s experience in providing solutions for our customers is second to none. Using our Implementation Methodology, we can help our customers prepare for any challenges they face over the coming year. These include:
- Template Development (Design Gallery)
- Business Process & System Integration documentation
- Testing new functionality
Click here for more info on our service offerings.
In doing this, we can continue to strengthen our relationships with our existing clients, as well as reaching out to new friends in the legal industry.
Now for that Wedding Anniversary trip…
Jamie Workman, Business Consultant