Blog Post

Key Developments in MENA’s VAT Landscape

In the Middle East and North Africa (MENA) tax environment, regulatory change is an ongoing trend. Since VAT was first introduced in the region, tax leaders have had to adapt to a vast array of new indirect tax rules, enhanced regulations and fines – alongside developments like e-invoicing, country-by-country reporting, economic substance rules, transfer pricing and the steady digital transformation of tax. It’s clear that tax will never be a static regime. Further information on how Thomson Reuters tax solutions can support your business can be found at the end of this blog.

In the Kingdom of Saudi Arabia (KSA), for example, the regulations have been updated several times – most notably in July 2020, when the government raised the standard VAT rate from 5% to 15% as part of the tax measures taken to shore up the economy during the COVID-19 crisis. Another new development, coming into effect on 4 December 2021, is KSA’s new electronic invoicing (e-invoicing) system, which will make it mandatory for all taxable persons subject to VAT; and any other parties issuing tax invoices on behalf of suppliers subject to VAT to develop the capabilities to generate and store electronic invoices. 

The introduction of e-invoicing is unlikely to be the only VAT regime change in KSA going forward. For instance, Saudi Finance Minister Mohammed Al-Jadaan recently announced that the government may review and decrease the VAT rate, if certain conditions are met, over the next one to five years.

Along with these changes comes the increased risk of tax teams making errors in their VAT accounting and compliance. Therefore, taxpayers need to assess the capabilities of their systems to manage ongoing regulatory change in an accurate and agile manner – or face potential fines, penalties and reputational impacts. 

The digitization of tax

In addition to ongoing tax rule and rate changes, companies also need to prepare their VAT strategies and systems for the continuing digitization of the tax system, in the region and globally. This has several potential benefits for both governments and businesses.  

Firstly, managing documents and data digitally helps to increase the transparency of tax information, making it easier for tax authorities to monitor, govern and control their tax systems.

Audit processes will also be able to run more smoothly, due to tax data being easily accessible and available in a standard, accurate format. All these factors help to improve tax compliance rates, combat tax evasion, reduce the shadow economy and close the tax gap – to support economic stability in the region.

With the right technology in place, digitizing and automating indirect tax processes can generate significant time and cost savings for businesses too. By supporting greater efficiency and reducing the time spent managing data manually and consolidating paper bills, organizations can streamline tax compliance and free up more resources for core business activities.

With these benefits in mind, it makes sense to embrace indirect tax automation as an opportunity to build a best-practice VAT compliance approach.  

Choosing the right system to manage VAT as regulations continue to change

When considering their IT options, taxpayers in the MENA region should account for the speed at which VAT regulations can change.  It is worthwhile putting the right indirect tax automation capabilities in place, right from the beginning, to avoid continuous IT maintenance and updates, and minimize the risk of non-compliance going forward.

While it may be tempting to focus on only meeting the minimum system requirements for VAT compliance, putting a complete VAT automation solution in place now will help to ensure that your business is ready for any further regulatory changes in the tax environment going forward.     

With a solution that is designed to manage, streamline and automate all aspects of VAT in the MENA region, your tax team can continue operating efficiently, no matter how often tax rates and rules are updated. This way, your business is well-prepared for continuing regulatory change, as well as the ongoing digital transformation of tax. 

How we can help

With the ONESOURCE Indirect Tax Compliance solution from Thomson Reuters, your organization can: 
  • Generate, store, amend and share compliant VAT invoices, credit and debit notes electronically, as required by law.
  • Issue all invoices in Arabic (and other languages, as needed). 
  • Integrate easily with ERP platforms and external systems, as needed.
  • Prevent tampering and keep data and information secure.  
  • Easily import transactional data from third-party ERPs, point of sale systems, e-commerce and shopping cart platforms, other applications, and in-house IT.
  • Automate VAT rates and rules, keeping data free from errors and ensuring compliance with the applicable laws and regulations, in their current version.
  • Save time that would be spent on data collection, cleansing and manipulation.
  • Provide a single source of truth for tax data, to support effective decision making and better compliance.
  • Issue, maintain and easily retrieve accounting records or any other document to support all transactions. 
  • Adapt and scale to suit the changing requirements of legislation and operational needs. 

Any changes needed to comply with the constantly evolving tax landscape in the MENA region are tested and applied by us; and made instantly available to your organization. That means you are fully equipped to meet all your VAT compliance obligations, now and in the future.

Contact us today to discuss your unique requirements. 

Find out how ONESOURCE can support your indirect tax needs including e-invoicing. 

Complete the form and our team will get in touch. 

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