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Abu Dhabi, UAEMonday 17 December 2018

Small businesses to feel the strain of VAT

Setting up an accounting system will set entrepreneurs back about Dh3,000 with monthly maintenance costs of Dh1,500 per month

Companies in the UAE need to look beyond cost-cutting efficiencies to revenue-generation effectiveness in 2018. iStockphoto.com
Companies in the UAE need to look beyond cost-cutting efficiencies to revenue-generation effectiveness in 2018. iStockphoto.com

Lisa Martin, a Dubai-based accountant from The Counting House, says those who will feel the most pain from the introduction of VAT will be small business owners “who have to start accounting properly, perhaps for the first time, and who will need to seek outside help to ensure they are VAT complaint.”

Ms Martin estimates the cost of a fully VAT compliant, cloud-based accounting system to be approximately Dh60 per month. “Setting up the accounting system costs in the region of Dh3,000 for a simple business, and ongoing accounting and VAT compliance will cost around Dh1,500 per month,” she says. “These are obviously estimated and are based on a simple business - the more transactions that a business has, the higher the cost.”

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Read more:

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Small business owner Faisal Ashraf, of Al Shakline AC, is concerned about the impact of VAT on the future of his air conditioning business in Abu Dhabi, which is already struggling because payments from contractors and clients are often late. “This is really hurting us very badly,” he says. “We complete the job but we don’t get payments on time. The delay goes on for months and sometimes we don’t get anything at all.”

But not all small business owners are worried.

Mita Srinivasan, an Indian in Dubai who runs the communications company Market Buzz International, says VAT will not hugely impact her business, since most of her invoicing is international.

“Only for some of our services where we outsource elements like photography and freelance writers would we incur these charges, and in most cases we would pass it on to our clients,” she says.