Businesses should allow from two to four months to prepare themselves for value-added taxes (VAT) registration and implementation, Mansoor Sarwar, Technical Director at Sage Middle East, said at an event focused on the VAT rollout in Bahrain. Bahrain implemented a countrywide 5 percent VAT on products and services as of 1 January 2019.
“We recommend you get ready as quickly as possible. Firms that do not will find themselves paying VAT, adding five per cent to their purchase costs, until they receive their VAT certification. Preparing early will allow firms to make sure they have sufficient time to implement their VAT-compliant systems, from impact assessment through design and implementation to testing and operation,” Sarwar shared with members of Bahrain’s business community that attended the event organised by Tamkeen, the Bahrain government’s business support agency.
In his presentation titled ‘Digital Transformation in a Tax Economy’, Mansoor Sarwar added that only the largest firms were required to register on 1 January. Other firms had the option to join the scheme before further rollouts in June and December.
Saudi Arabia looks close to achieving its first-year VAT revenue goal of SR35 billion, Sarwar said, with the UAE also close to gaining its AED12 billion goal. Bahrain, with a smaller GDP, has set a revenue goal of BHD600 million.
“It is half of what the UAE expects to do, and one-sixth of Saudi Arabia’s expectations,” Sarwar said. “If Bahrain pulls it off, that will be an achievement by any stretch of the imagination.”
Although certification will reduce direct costs of VAT to zero, firms would still face indirect costs as they prepare for compliance, including the costs of adopting new systems and training staff, Sarwar said as part of a panel of experts assembled by Tamkeen.
The expert panel, moderated by Ibrahim Parwaz, Strategic SMB Manager, Sage ME included Dr Jarmo Kotilaine, Tamkeen’s chief of planning and monitoring, Dr Abdulhasan Al Dairi, Chairman of Bahrain SMEs Society, Dr Jassim Haji, Chairman of Bahrain Artificial Intelligence Society, and Husam Addin Abdelhafiz, Managing Partner at KANZ.
Sarwar outlined common mistakes small and medium-sized businesses (SMEs) make during VAT implementation. These include deleting invoices and credit notes, issuing non-compliant invoices and charging VAT prior to receiving their tax certificates. Bahrain firms could avoid such mistakes by planning and adopting suitable solutions, he added.
For his part, Ibrahim Parwaz outlined the capabilities of Sage’s affordable, subscription-based Sage Accounting software, demonstrating its ability to rapidly generate VAT invoices and compliant audit reports.
Speaking after the event, he said Sage’s best advice for any business preparing for VAT compliance was to focus on people and systems. “You need to have the people that understand VAT, that can implement VAT, and then the systems that support them, that are compliant, that are available anywhere, any time in the cloud, and are affordable.”
Sage, the market leader in integrated accounting, payroll and payment systems solutions, operates in more than 62 countries in the Middle East and Africa, and has lately been involved in helping companies in the UAE and Saudi Arabia implement the tax system.