What can we learn from businesses that have been through a VAT implementation? More relevantly, what can Bahraini businesses do differently to make the VAT process easier?
Keypoint has completed over 150 VAT engagements in Saudi Arabia and the UAE and some of our staff worked on implementations in Malaysia. Our experience has taught us three major lessons:
1.Start getting ready yesterday
No client has ever complained of having too much time to get ready for VAT. There are always unforeseen hurdles and issues that delay readiness. There is no downside to being ready before VAT goes live. Use any extra time to:
- Proactively communicate with vendors, customers and other stakeholders outlining what your business will do about VAT and what you expect them to do. For example, vendors are probably going to have to include customer details on their tax invoices. You could send them your official business name, VAT registration number and address so they can update their records in advance and issue correct tax invoices
- Review pricing strategies
- Operate upgraded systems in parallel with existing systems and processes to iron out bugs
- Prepare mock VAT returns
2.Ascertain staff capacity
While VAT affects every part of every business, your finance and IT teams will be the mostly heavily impacted. Do your teams have sufficient capacity to – on top of their existing responsibilities – coordinate and implement the changes required? How complex is your business (from a VAT perspective)? How much time do you have to get ready?
Different businesses deal with capacity issues during implementation in different ways:
- Recruit a dedicated project manager to liaise between the VAT adviser and the relevant parts of the business, facilitate decision-making and oversee implementation work. This could be a permanent hire or a contractor brought in for a fixed term during implementation.
- Appoint – or recruit – an in-house VAT manager to oversee VAT implementation and manage VAT obligations going forward. Working closely with a VAT adviser during implementation will significantly increase in-house VAT knowledge. That knowledge can then be used to manage VAT obligations and reporting after implementation (with the support of VAT advisers where required).
Does every part of your business have an appropriate level of relevant VAT knowledge? Have changes to systems, processes and policies that affect specific parts of the business been explained and tested? Successful VAT implementation requires clear internal communication. Having a VAT-savvy finance team only gets you so far if sales teams aren’t able to tell customers how VAT affects pricing or if accounts payable teams are processing invalid vendor tax invoices. Don’t underestimate the work involved in communicating these changes and spreading VAT knowledge through the business.