Many businesses still seem unsure about what is required of them in relation to certain aspects of the VAT regime and therefore require further clarification, according to the ACCA & Thomson Reuters VAT Return Filing and Compliance survey.
The survey also found that numerous organisations highlighted they had not yet filed their returns (at the time of interview); they did feel ready and had the view that they will gain more certainty and confidence once their returns have actually been lodged.
“It seems almost universally clear, while not explicitly stated in the survey responses, that businesses view VAT filing as a chance to find out whether they are indeed filing correctly and are thus compliant. There is a lot of insecurity around what is and is not correct – leading us to believe that the details of VAT compliance and reporting still remain slightly ambiguous,” said Chas Roy-Chowdhury, Head of Taxation at ACCA.
The findings also highlighted that several businesses have chosen to outsource their VAT projects which have resulted in an additional cost to the business. Roy-Chowdhury added that “in an ideal world, tax collection should not add an extra layer of cost to the business or collecting agent. However, we do see from the survey that several businesses did choose to outsource their VAT compliance at significant expense, which could impact SMEs’ margins and stability.”
The importance of VAT compliance was further reiterated with Pierre Arman, Head of Tax and Accounting at Thomson Reuters commenting that “the authorities have made it clear that they will be clamping down on companies that do not take VAT compliance seriously. KSA’s General Authority for Zakat and Tax (GAZT) registered over 3,000 VAT violations in January and February. These breaches included failure to register for VAT, issuing invoices that lack the required VAT information, over-charging VAT and omitting the VAT identification number on an invoice. It has also been reported that the UAE’s Federal Tax Authority (FTA) had begun auditing firms’ compliance efforts following the first VAT return submission deadline.”
Arman added that technology can significantly ease VAT’s administrative burden through automation and streamlined data management. “Our 2017 survey shone a light on the fact that many organisations in the GCC still needed to address the VAT readiness of their technology systems, with only 29 per cent saying their systems were capable of supporting their VAT implementations. This year, we asked respondents how they set up their VAT determination logic. Only four per cent of those surveyed had a dedicated tax engine in place. More than two-thirds (67 per cent) were using a VAT configuration in an existing SAP, Oracle or other legacy ERP system.”
The importance of ensuring that VAT is managed as a continual improvement process was further emphasised in the report with businesses being encouraged to view the VAT regime as an ongoing opportuntity as opposed to a burden on business.
The survey questions were based on some of ACCA’s ‘12 Tenets of Tax’, with the report highlighting key principles that businesses within the GCC should also take into consideration to aid compliance.