Deloitte launches volume 2 of its whitepaper series explaining the impact of VAT on Real estate and Construction, Tourism and Oil and Gas
To help businesses in the GCC understand the potential impacts of the implementation and operation under VAT, Deloitte Middle East has been issuing a series of whitepapers designed to provide a greater understanding of the impacts of the tax on specific industries.
Deloitte has now launched the second volume which contains insight into the impacts of VAT on the real estate and construction, tourism, and oil and gas industries. The second volume also provides key considerations for the appropriate structure of an internal VAT function based on a European benchmark in collaboration with the specialist global indirect tax recruiters Beament Leslie Thomas (BLT). Finally, this volume also discusses technology considerations with the aim to reduce the uncertainty for businesses and to highlight the key areas that organizations should focus on as they embark on their journey to VAT readiness.
“With only a year to go to the planned date of implementation of VAT, businesses operating in GCC countries need to urgently start focusing on getting ready. Our experience, in the recent implementation of VAT in Malaysia, is that the area with the longest lead time is technology, and so businesses would be well advised to commence planning any major system changes to their ERP in the next few months in order to have a chance to be ready by 1 January 2018.” explains Justin Whitehouse, Deloitte Middle East VAT leader. “Businesses must therefore ensure relevant employees have the appropriate skills and knowledge for their roles, through appropriate training and recruitment.”
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VAT impact on the real estate and construction industry
One of the main concerns surrounding VAT is in its application to the property development and construction industry. This is because the range of transactions underpinning the planning, construction and sale of commercial or residential real estate is varied and often highly complex which creates the need for an extensive suite of bespoke VAT rules to cope with these challenges.
The development and construction sector is of huge importance to the GCC as a whole but the scale of many businesses operating in the sector, and the cost and revenue throughput that they manage, by nature create an environment of risk associated with poorly understood or managed VAT obligations.
‘The construction and real estate sectors are complex from a VAT perspective and this carries significant VAT risks especially in respect of long term contracts and therefore businesses are well advised to consider the impact of VAT as soon as possible’ said Nurena Tarafder, Deloitte Middle East real estate and construction industry VAT leader.
Commercial risks are the most significant of the challenges listed in the paper that need to be addressed including lead times on major projects and Registration of subcontractors.
VAT impact on the tourism industry
There are many very distinct functions that are loosely categorized as part of the tourism industry, including airlines, travel agents, tour operators, accommodation and other local service providers. Each of these will be affected in one way or another by the application of VAT within the GCC.
“Businesses in the tourism sector are likely to find the impact of VAT wide ranging and may find themselves with multiple VAT registration obligations and significant compliance requirements as a result” according to Bruce Hamilton, Deloitte Middle East Consumer Business Industry VAT leader.
VAT implementation on oil and gas industry
Many in the sector anticipate that there may be a VAT relief applying to the oil and gas sector in some form – but even if this is the case, VAT is still anticipated to have an impact on all businesses.
“Oil and gas companies will find VAT a significant planning and process issue but, in particular, being a capital intensive industry they need to think carefully about working capital issues and how long refunds of input VAT credits are likely to take,” according to Matthew B. Parkes, Deloitte oil and gas expert.
To view the full whitepaper, please visit the following link: http://bit.ly/2jpuVDY