Saudi Arabia approved the National Transformation Plan (NTP) on Tuesday June 7, 2016, as part of Saudi Vision 2030 and goal to reduce reliance on oil. The NTP aims to boost non-oil revenue to 530 billion riyals (US$141 billion) by 2020 through more than 500 initiatives including the implementation of new taxes and increasing government fees and taxes on “harmful products”. Minister of State Mr. Mohammed Al Al-Shaikh confirmed that the only tax commitment approved so far is Value Added Tax (VAT).
“VAT is one such strategy proposed to diversify as it is a popular fiscal tool considered efficient, cheaper to operate, less open to fraud and less likely to distort investment decisions by businesses than any form of direct tax,” said Justin Whitehouse, partner and indirect tax leader at Deloitte in the Middle East.
Although VAT introduction is just around the corner in the region, the recent Deloitte Middle East CFO survey shows that almost half of polled CFOs still have a “minimal understanding” of the range of impacts typically associated with the introduction of VAT while 93% of them expect to see some level of impact upon their business.
“With the introduction of VAT being a real possibility throughout the GCC region, now is the right time to understand how the tax could impact your business in order to ensure that all of the financial, commercial and operational aspects are covered upfront and to allow communication of the appropriate messages throughout the organisation,” explains Whitehouse.
As part of Deloitte in the Middle East’s continuous effort to support and provide guidance to firms through tax reforms, the firm has held more than 10 seminars throughout the month of May covering all of the GCC countries.
Deloitte has also created a series of tools to guide businesses through the current tax reform including a free of charge bilingual online introductory guide about VAT in the GCC, whitepaper, VAT readiness assessment tool, series of complementary seminars, VAT academies and industry focused roundtables.
Going one step forward, Deloitte has also developed “custom-made” support through its VAT review smart (VRS), a low cost online tool, which assesses clients’ readiness for the indirect tax. The tool will then generate a “VAT Preparedness Assessment” document that will set out the business’ current status, what issues it is likely to face, and how long it may take it to be ready to comply with VAT regulations.