Baker McKenzie recently hosted workshops in Dubai and Abu Dhabi on doing deals and conducting business in the Gulf region in the new value added tax (VAT) regime.

With Saudi Arabia and the United Arab Emirates (UAE) introducing VAT on 1 January 2018 further to the Gulf Cooperation Council (GCC) VAT Framework Agreement, and other GCC member states expected to follow by January 2019, businesses need to look ahead to the primary and secondary effects of the new VAT regime on their deals and operations in the GCC.

The workshop was led by senior representatives from Baker McKenzie and tax advisors Cragus Group, and centred around the strategic and practical implications of the new VAT regime. Over 200 executives from leading corporates, financial institutions and government entities gathered to consider how they might have to adapt when structuring and executing M&A transactions and conducting commercial operations. 

Key issues highlighted included the impact of registration, impact on supply chains, negotiation of commercial contracts, VAT treatment of domestic and cross-border deals, industry exemptions, risk management and compliance, and dispute resolution.

“The new VAT legislation in the GCC is consistent with what we see elsewhere in the world, and implementation is just the beginning of a new economic chapter for the region,” said Jan Snel, Global Head of VAT at Baker McKenzie, based in Amsterdam. "The impact of VAT on a nation's economy cannot be underestimated - indeed, in some markets, VAT typically comprises a staggering 40% of government revenues. System readiness is the most important priority right now, and organisations may have to revisit their entire business model accordingly."

Reggie Mezu, UAE Director at Cragus Group, added, "Despite the challenges of harmonising VAT across the GCC, much of the legislative framework is in place in both Saudi Arabia and the UAE, with final regulations imminent. Many organisations are actively preparing for implementation, and will feel more confident once all aspects of their operations, supply chains and contractual relationships are closely examined and tailored to the new regime."

As trusted tax counsel to multinational companies for over five decades, Baker McKenzie's market-leading Global Tax Practice can help your organisation with the strategic and practical aspects of the GCC's new VAT regime. Further information is available on our dedicated GCC VAT website here.   

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