VAT is coming. Are you ready?
Companies will have to shell out a large sum on staff training and upgrading of IT systems after VAT introduction
MUSCAT: Traders in Oman face paying up to OMR40,000 to change to a value added tax (VAT) system ahead of its introduction here, according to analysts.
GCC countries have drafted a collective VAT framework which was announced by Saudi Arabia last week. All other countries in the council will follow suit and an announcement is expected soon by the Oman government on what will be subject to VAT and what will be exempt.
Experts who compiled Deloitte’s Indirect Tax Client Survey state that costs could start from OMR10,000 and climb higher than OMR40,000 depending on the size of the firm and Oman VAT regulations. Training of staff will take up a large chunk of the bill.
And a spokesman from KPMG warned business to act now. Tax experts from Deloitte surveyed businesses in Malaysia - which introduced a Goods and Sales Tax in 2015 - and said they expect Omani overheads to be higher.
“Given that the general cost of living and procuring services in Malaysia, where we conducted the survey, is significantly lower than that in the Middle East, we’d expect Omani businesses to be facing much higher costs than this in reality,” Kate Bacon, Manager, Indirect Tax at Deloitte ME said.
Nearly 28 per cent of the survey respondents in Malaysia said that it took more than OMR 40,000 to implement Goods and Sales Tax (GST) systems, a tax similar to VAT, in their organisation.
According to business leaders here, only a few companies are ready, but VAT implementation has been included in budgets.
“While we are waiting for an official announcement from the government, we have set aside a budget of OMR50,000 for implementation of VAT. Seventy per cent of this would go in upgrading IT systems and the remaining would go for staff training,” Darren Tong, CEO at Renna Mobile, said.
“We have to allocate VAT implementation budgets for the year 2018 which is expected to be not less than 10% of our total cost outlay. We have plans for staff training and systems updates for VAT. The tax is inevitable so companies must begin to prepare instead of reacting slowly and finding themselves in trouble later,” Raj Kumar Ahmed, CEO of Al Khalij Group said.
“The ministry has yet to announce anything so the best we can do now is staff training, which is very expensive. We have dedicated more than OMR50,000 for VAT systems alone,” an official from a leading automotive dealer stated.
Smaller companies would appear to be lagging behind.
“I am waiting for further details before commencing or just hoping it will not happen any time soon as I don’t have such a big amount to implement VAT compliant systems,” admitted one managing director in Muscat .
Saudi Arabia recently released the GCC VAT framework that is understood to be signed by all six GCC countries including Oman, paving the way for local regulations to be announced by respective governments.