VAT in Gulf to bring “burdensome” costs

The onset of value-added tax (VAT) in the Gulf countries on January 1, 2018 is expected to afflict the region’s companies with new costs.

To prepare for the tax, firms must replace or update their IT systems, train staff and develop new procedures, warnings ratings agency Fitch Ratings.

“This will be particularly burdensome as it will add to costs when low oil prices and lacklustre economic growth are weighing on corporate performance, particularly for small and medium-sized enterprises,” said the agency, in a statement.

Firms that operate between Gulf countries, or between free zones, are in for additional headaches, said the agency, “as agreements between individual GCC [Gulf Cooperation Council] members could vary”.

VAT is one of several planned taxes in the Gulf countries that are designed to bolster government revenues as the region transitions to a more sustainable economic model. A consultant at Deloitte recently said the onset of VAT would mark the start of the most dramatic changes in the region since the discovery of oil.

©2017 funds global mena

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