Exempting certain goods and sectors from value added tax (VAT)
In addition to small and medium-size companies and the application will be in 2018; A workshop by "Access Centre – Qatar" on:
4| Year (22) – Wednesday 8 of Ragab of 1438 AH correspondent 5 April of 2017 (3441) Al-Watan economy
By – Said Habib
- Qatar maintains its position as a top global "tax haven"
- VAT is implemented in "162" countries and is the world's most common tax deduction
- Abu Farah: All GCC countries will implement VAT at the beginning of "2018" or "2019" at maximum
- Halees: the local training market is witnessing strong competition to the benefit of customers
- The largest beneficiaries of VAT are the technology, auditing and infrastructure sectors
Fathi Abu Farah, a partner of Moore Stephens, the global accounting advisory, expects the exemption of health and education sectors, small and medium-size companies and more than 1000 commodities and food items from VAT which will be implemented in all GCC countries, including Qatar, in early January 2018 or 2019 at maximum.
Abu Farah pointed out during a workshop held by "Access Centre – Qatar" yesterday that VAT is implemented in 162 countries and such large number clearly indicates that it is the most widespread tax worldwide. He also noted that the tax will not exceed 5% of the original price. According to Abu Farah, the tax is expected to be used in the second half of 2018 with the exemption of small and medium-size companies that generate annual revenues of no more than100,000 USD. Moreover, certain frameworks and regulative rules will be set out to organize the implementation of the tax on governmental and semi-governmental institutions. In the course of doing so, the Qatari government will determine the fines and penalties that will be imposed on evaders.
Abu Farah further added that the tax will concentrate on complementary and luxury commodities and this will help suppress the consumption outburst in the country, encourage a more rationalized consumption behavior and curb wasteful behavior. He also indicated that Qatar, as a country that has the world's lowest tax rates, will continue to maintain its lead in this regard even after the implementation of VAT. This is because the value added tax would be indirectly deducted from consumption; however, in return, no taxes will be imposed on profit or income. In consequence, Qatar will continue to be a tax haven that attracts foreign investment flows and will continue to provide an attractive investment environment.
Mr. Abu Farah noted that the tax payment index of 2016, issued by the World Bank and PriceWaterhouseCoopers (PWC), classified Qatar as the world's top country in the lowest tax rates. The overall average tax rate is 11.3% of trade revenues consequently leading to this advanced rating.
In Qatar, taxes are paid in four annual batches, and the average time required to comply with tax requirements is 41 hours. On the contrary, the total tax rate of the Middle East as a whole is 24.2% divided to 17 annual batches and the average time required to comply with tax requirements is 160 hours.
Abu Farah emphasized the importance of distinguishing between direct and indirect taxes as direct taxes are directly collected by the government such as income, corporate and profit taxes, while indirect taxes are collected through a medium such as complementary and luxury commodity stores (retailers) which collect these taxes on behalf of the government according to definite rules such as the value added tax (VAT).
Abu Farah notes that a slight impact on the prices of basic commodities and services is likely to take place in Qatar upon the introduction of VAT. However, he added that consumption patterns will determine the impact and consequences of VAT implementation. That is, if the consumption pattern is based on purchasing complementary and luxury goods and is marked by wasteful behavior the prices will be affected, but if the consumption pattern is rational the prices will not be affected by the introduction of VAT and will quickly adapt to such step. Mr. Abu Farah also expected that the government will use the revenues of VAT to increase the government's capital expenditure on infrastructure projects and that the government will work on improving its conditions before the introduction of the tax,
since it requires proper technological, technical and accountancy infrastructures. In addition to this, there is a need for training the human resources to meet the requirements of implementation
He as well noted that the sectors that will benefit most from introducing VAT are the financial auditing and consultancy offices that will provide assistance to companies on complying with VAT, the technological companies that will face a surge in demand on building integrated technological infrastructures for companies to achieve compliance with VAT requirements, in addition to infrastructure companies. The government will re-pump VAT revenues in many sectors of which the infrastructure sector is the most prominent.
An executive regulation will be issued in Qatar to explain the procedures of filing and tax returns, how to comply with VAT requirements, penalties on tax evasion and delay penalties. Mr. Abu Farah outlined his expectations that Qatar's ranking in several spheres, based on international indicators, will improve after the implementation of VAT and that the country will achieve a GDP rate of more than 2%.
Training and Accountability
Tariq Halees, director of "Access Center - Qatar", said that the workshop organized yesterday aimed to explain all the aspects related to the value added tax that will be implemented in GCC countries starting from next year. He added that the topics of the workshop included analyzing the dimensions of implementing VAT and highlighting the strategic goals of such implementation in addition to discussing the methodology of transforming these goals to operational plans in the case of companies.