Lessons learned from the UAE and Saudi Arabia’s roll-out of VAT

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With the entire supply chain affected by VAT, firms cannot start its implementation soon enough
Two of the six GCC states, the UAE and Saudi Arabia, introduced VAT on 1 January 2018. With Bahrain, Qatar, Kuwait and Oman in the process of organising their VAT implementation, the experiences in the UAE and Saudi Arabia provide an indication of issues that businesses in the GCC may face when VAT is rolled out across the rest of the region.

Main challenges
One overriding challenge observed in both the UAE and Saudi Arabia was that businesses typically underestimated the scope and level of effort required to implement VAT. The combination of dealing with a new tax, coupled with the significant business and systems changes that were required, put a lot of pressure on companies to adapt.

To their credit, most organisations got there in the end, but as our survey shows, 77 percent felt that they could have started the process at least three months earlier.

Our survey also revealed that 90 percent of those in the consumer business sector found it took longer than three months to implement, and more concerning, all in the technology sector said it took them longer than six months.

Creating, drafting and implementing tax law is a challenging task. Even though the intention to implement VAT was announced more than a year before the go-live date, detailed legislation was understandably and for a variety of reasons released relatively late in the process in both countries. Both the UAE and Saudi Arabia took a considered view that good tax law cannot be rushed.

Unfortunately, a number of companies were hesitant to commence implementation projects until after the release of the VAT legislation and the timeline for registration for VAT purposes was announced, leading to truncated implementation and delays in the commencement of projects.