Low rate ‘to ease impact of VAT on UAE firms’ UAE Business
The introduction of value-added tax (VAT) in the UAE may intensify the cost of doing business in the country, but the anticipated low rate of 5 per cent should mitigate this, according to industry experts.
What will help businesses to prepare is early sight of the detail of the legislation so that organisations have time to build management and financial reporting systems to support the detail of the requirements, said a panel of experts at a discussion about the impact of VAT on businesses in the UAE.
The discussions were recently hosted by the Association of Chartered Certified Accountants (ACCA) and aafaq Islamic Finance in Dubai, UAE.
The panel felt that the simpler the system; the fewer exemptions and the greater the consistency there is across the GCC the easier it will be for all.
A key area that will be critical to the implementation of the VAT system will be the judicial system to support this specifically a clear appeals and enforcement system. This is likely to take some time to develop and implement.
It was also heard that the anticipated low rate of taxation is unlikely to deter foreign direct investment given the country’s overall investment attractiveness: its excellent infrastructure, geographical location and political and economic stability. Also foreign investors are typically familiar with these types of taxes.
The imminent arrival of corporation tax is understandably causing concern for small and medium enterprises (SMEs) in the UAE who have been used to operating tax-free. The panel highlighted the potential for tax reliefs and the likelihood of revenue threshold exemptions to be brought to support SMEs. In any event, SME’s preparedness to adapt to a new tax reality is paramount, the panel said.
There is a key role that professional bodies and advisory firms can play in building the knowledge, skills and awareness of those who will be impacted and when the detail of the legislation is finalised and made available.
ACCA’s global head of taxation, Chas Roy Chowdhury was the keynote speaker. Addressing over 100 finance professionals, Chowdhury shared his views on how Europe has witnessed VAT since the 1970s as a truly renaissance taxation that was able to pass on the ultimate burden of tax on value adding supply chain to the final consumer.
Lindsay Degouve de Nuncques, head of ACCA Middle East said: “We believe that ACCA members possess the right competences to get GCC businesses in a state of readiness for any introduction of tax. ACCA members support compliance with tax laws as well as accounting and reporting on taxation according to the International Financial Reporting Standards (IFRS). The most vulnerable business community is the GCC SMEs. However given ACCA’s training model, we can work with SMEs to very quickly develop and recruit professionals to help mitigate the risk of tardiness.”
At the event, aafaq Islamic Finance was publicly recognised by the ACCA as providing outstanding training and development opportunities for their finance and accounting employees.
The ACCA Professional Development Employer certificate was presented to Mujtaba Naseem, CFO & deputy CEO at AAFAQ Islamic Finance by the head of ACCA Middle East.