Family-owned offices, importers/exporters, and technology, media and telecom (TMT) firms will be impacted in various ways, therefore, they need to ensure that they're prepared for the value-added tax (VAT) ahead if implementation from next year, says new study. "Every family office operating in the GCC will be affected by VAT because anything purchased in the GCC is likely to be subject to VAT. In addition, family offices will inevitably be dealing with VAT registered businesses as suppliers, or advisers to the family, and they will need to ensure that the VAT is treated correctly," according to a Deloitte study released on Wednesday. "To mitigate possible difficulties with VAT, it is important the family's office processes and procedures and expenditures are reviewed, and that family and business expenditure are separated. Not only is this good business practice, but it also minimises the risk of excess reclaims or under-reporting of VAT," said Fiona Mcclafferty, Deloitte Middle East Family offices Tax specialist. At this stage, according to Deloitte, the GCC has not indicated how family offices will be treated for VAT purposes. Questions remain about whether family offices will be recognised as business and allowed to register for VAT, or whether the business test will be applied as a pre-requisite. The Gulf Cooperation Council (GCC) nations have signed an agreement to implement five per cent VAT. The UAE and Saudi Arabia will implement tax from January 2018 while the other nations will jump into the bandwagon at a later stage. The companies and individuals will be subject to zero-rated, exemption and five per cent tax - depending on what categories they fall into. Industries like basic food items, healthcare, tuition fee, air travel and exports outside GC have been exempt under the VAT. With regard to impact on TMT industries, Deloitte says that one of the main VAT issues is knowing in which country the tax is payable. "Businesses in the TMT industry need to ensure their processes and IT systems are able to capture, store and provide evidence of where their services are being consumed. "Businesses should review transactions, their roles and parties involved in the supply of services to determine how they might fit within the expected VAT law of each of the GCC member state," explains Doukje De Haan, TMT industry VAT expert. Highlighting the impact on the activities of importers and exporters, VAT will interact with customs duty and customs authorities at national borders. "Import VAT should be payable on the customs duty inclusive value of taxable goods introduced into the GCC from outside countries. VAT reporting and invoicing requirements will likely be activated on intra GCC movements of goods between member states. Importers and exporters may continue to rely on existing processes and control," Deloitte added. Meanwhile, there remains uncertainty about how VAT relief for businesses operating in free zones will occur, but free zone entities should note that "on-shore" costs across the region may increase if they are not entitled to register for VAT in the location where VAT is incurred, according to the global consultancy's whitepaper's release on Wednesday
Family offices told to separate family, business expenditures ahead of VAT.
08 Oct, 2017 | Posted by Admin