Are The Saudi Professionals And SMEs Ready to Implement The VAT?

The Saudi government has approved the introduction of VAT of 5% starting from January 1st, 2018, unless the goods or services are exempt or zero-rated. The VAT will be applicable on multiple sectors including: consumer and industrial products, technology, media and telecommunications, financial services and real estate. Some sectors such as education, health, and transportation may be exempt or at zero rate.

Small and medium enterprises and professionals must start to determine if they ae ready to implement VAT. There are four areas that should be considered:

  1. Accounting system
  2. Processes, including VAT preparation and cash flow management
  3. Contractual arrangements with both suppliers and customers
  4. Skills of the accounting and commercial employees

Most of the Saudi SMEs and professionals do not have a proper accounting system to take into account of revenues and expenses. They need to start to look for simplified accounting system to manage their financials. Many are available in the market with a licensing price that range from 6 USD to 20 USD per month.

SMEs and professional need to review their internal processes to prepare the VAT reports, including netting the VAT collected from customers to this paid to suppliers, and preparing the report of the VAT to be reimbursed the government. In addition to this, SMEs and professionals need to consider that part of their cash flow should be reserved to reimburse the VAT to the government.

SMEs and professionals need to review their contractual arrangements with both suppliers and customers and add the VAT costs, if the service or the goods are not exempt.

Finally, SMEs and professional need to acquire the right set of accounting capabilities to manage VAT. For SMEs, a VAT training for their accountants will be enough, while the professionals need to do a simple training on VAT and identify the right accountant professional to prepare the VAT reports.

We would recommend SMEs and professional to

  • Assess the VAT readiness. Some of the major accounting firms provide online assessment tools
  • Map the transaction footprint to assess the future VAT liabilities and obligations
  • Review all contractual arrangements with both customers and suppliers, and change the contractual terms
  • Develop a roadmap and identify the resources required to submit the VAT reports in 2018

Serviis.com has multiple accounting professionals on our database that can support small and medium enterprises and professionals to get ready to implement VAT, and to provide services related to VAT obligations and liabilities. Search on our website for accounting and business professionals.

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s