VAT will help SMEs access bank credit easier
dubai — Obtaining credit facility from banks will become easier for small and medium enterprises (SMEs) in the UAE after the implementation of VAT as businesses will have to maintain their books from next year.
Pankaj Mundra, chairman of the Institute of Chartered Accountants of India — UAE (Dubai) chapter, said one of the major challenges for SMEs is that they have to maintain their books properly and regularly in order to be VAT-compliant.
“A lot of SMEs, who never thought of going to banks for credit facilities for expansion or during tough times, will benefit from VAT. If the companies keep their books clean, when there are tough times, they can obtain credit easily. Now, people come to us, but when we ask for books, they don’t have it. But now, they will have to compulsorily maintain them,” Mundra noted.
Naveen Sharma, vice-chairman of ICAI Dubai chapter, said SMEs will be able to get more finance because their turnover will not be questioned by lenders owing to their clean records.
The UAE Central Bank data showed last year that bank funding to UAE-based SMEs tightened as financial institutions were riskaverse. However, the Central Bank’s data for July 2017 showed that gross credit by UAE banks grew, reflecting an increase in business activity in the country. Gross credit increased by 0.2 per cent, rising from Dh1,591.3 billion at the end of June 2017 to Dh1,594.5 billion at the end of July 2017.
The ICAI — UAE (Dubai) Chapter on Tuesday organised a technical seminar on VAT. Justin Whitehouse, partner, indirect tax, Deloitte & Touche (ME), Mayur Batra, managing director, Mayur Batra Group, and Pugazhendhi, associate vice-president, Tally Solution, spoke about the challenges faced by companies and individuals prior to VAT.
In order to meet VAT compliance standards, companies must upgrade to world-class systems. “In the medium to long term, SMEs will benefit from the implementation of VAT because they will be on par with large corporations as far as systems are concerned,” Sharma added.
Anish Mehta, secretary, ICAI — UAE (Dubai) chapter, said businesses as well as professionals have to adapt to changes by identifying the impact of VAT on their businesses and assessing capability of their existing accounting and IT systems.
“This will give more opportunities for tax professionals. VAT implementation will also have immediate effects on consumer spending and consumption behaviour, which gives opportunities for entities to re-assess their business strategy and portfolio,” he added.
— waheedabbas@khaleejtimes.com