We examine the impact of VAT implementation in the channel business and what partners can do now to prepare.
Over the last year, there have been talks about introducing VAT in the GCC. The rate of VAT has been fixed at 5 percent and will have exceptions such as basic food items, healthcare and education. According to reports, it will be implemented in UAE on 1st January, 2018 while other GCC countries are expected to go live on the same day or latest by 1st January, 2019.
How does the introduction of VAT affect partners’ business?
Aarti Mohan, ERP and EPP Business Development and Strategy Leader, Oracle, says, “Partners have a huge opportunity in this scenario to approach customers and guide them on how VAT can be implemented. They are in a good position to help customers select the right software and demonstrate how the VAT feature functions.”
While it is an opportunity, channel partners also need to prepare to be able to successfully implement it in their own businesses. First and foremost, it is important to bring on board tax executives who understand the nuances of this implementation.
“Partners provide services so they need to know how they are going to price that as those services will be subject to tax. They must recalibrate their own processes and systems to cater to this new regulation.”
Partners with a global presence might already have this expertise, says Mohan. “It is only that it is now applicable to the GCC. The challenge will be for the smaller boutique partners. If I was a smaller boutique partner, I would tie up with global companies or focus on enhancing my own skills within my organisation to scale up and execute these implementations for themselves and for their customers.”
The law will be effective in UAE nine months down the line, how exactly can partners prepare from today?
Mohan says there are few aspects partners must think of right away. The first step will be to do an impact assessment.
“Partners need to identify the impact on their processes and systems. The second step is to look at an architecture of how they would go ahead and implement it in a technology environment.”
The third step involves simulating transactions in the business environment.
“Most ERP software, including ours, offers the complete capability to simulate a tax process or a VAT transaction end-to-end and evaluate the impact without implementing it until the effective date,” she adds. “The last two steps include implementation and going live, which needs to be done from the effective date. If I was a partner, I would begin the preparations today itself.”
And if a partner decides to do nothing?
“The government and tax authority will fine you for non-compliance. While the exact cost of these violations is yet to be declared, I’m sure it will be heavy,” adds Mohan. “Any kind of VAT implementation takes around six to nine months, so if a partner only thinks of it on the effective date – 1st January, 2018 – they already lose that much time and will be liable to the hefty fines.”
For more information on #VATinUAE, visit UAE Ministry of Finance website below: