VAT in Gulf: How Cloud ERP Software Can be a Game Changer



Senior editor

Parul Saxena

Chief editor

Last updated: April 13, 2021

2018 in middle-east began with VAT implementation.VAT has already been a major source of income in various countries such those under EU, Canada, Australia and many more. However, this is the first time businesses in middle-east are collecting it.

And why shouldn’t they do it after all according to EY, VAT rate of 5% will contribute about 1.4%($25 billion) to the GCC annual GDP.

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VAT is collected in almost every stage of the supply chain- starting from the procurement of raw materials to the final product sold in stores. The customer is the one who ends up paying the tax while businesses are responsible for collecting the money on the behalf of the government and then giving a brief report on how much they collected.

This concludes that countries in middle-east not only have to ensure that they accurately report on VAT requirement but most importantly do it efficiently by automating the whole process from the very start.

So how you can make your company complaint to such changes?

Fortunately, we have experts who have been dealing with the VAT for generations in other countries. They have come up with some amazing solutions and one such solution that we are going to discuss today is Cloud ERP software.

There are some outstanding benefits of implementing tax functionality in the cloud- say for example you always have access to the latest version of the software. Unlike on-premise ERP solutions which regularly requires lengthy upgrades, cloud ERP software is updated by the vendor on regular basis. So if there are any changes in the VAT or if any other tax regulation is put in place, it will be immediately rolled out in the next release.

To be VAT ready, businesses have to completely overhaul their taxation system and related business processes. Organizations will become desperate to become VAT compliant which will result in a massive wave of digital Transformation in GCC.

The helper in this situation will be process automation and ERP solutions that will ease the VAT associated burden from the heads of the organizations in GCC. Cloud ERP software is going to play a very important role in this transformation helping companies to cope up in difficult situations, especially when there are stringent timelines.

According to Arun Khehar, senior Vice-President of Oracle “ Cloud spending across the Middle East, Turkey and Africa will reach $715 billion in 2018.” The UAE market saw a significant growth in the cloud ERP market due to the government initiatives such as VAT compliance, Smart Dubai, UAE vision 2021, and Abu Dhabi economic Vision 2030.

This market for cloud ERP software is expected to grow further as businesses are looking for cost-effective solutions which are agile, efficient and productive.

Why Businesses in middle-east are preferring a cloud-based ERP over an on-premise Solution?

On-premise ERP solutions require huge investments in terms of hardware, servers, and training needs. On top of it, customization requirement and maintenance of hardware and servers will contribute to the additional costs. Constant upgrades have to be made creating a bottleneck for businesses as all the energy and time has to be diverted again to get the system up and running.

On the other hand, cloud ERP software makes managing VAT extremely easy, flexible and affordable. While you are dealing with cloud services it becomes the provider responsibility to maintain the infrastructure and provide continuous updates to ensure the availability of the latest version of the software without incurring additional costs.

Cloud ERP software can be accessed easily over the internet using smart devices. Also, Cloud ERP software requires less time to deploy and when VAT compliance is a priority nothing can be a better option than this.

Confused where to start from let us help you

So how to determine which approach suits you the best? A new ERP in the cloud or keeping the core ERP and only moving the VAT services to the cloud?

Some factors that should be considered are:

  • The age of your existing ERP system. Are you running a brand new version of the Cloud ERP software or are you using an old edition?
  • In how many countries your business is spread? More geographies and currencies mean more rules, regulations and compliance issues. An ideal solution in this situation is a full-fledged migration to the cloud in order to keep on top of all the permutations.
  • The number of transactions your ERP processes per day? More transactions mean you need your core system to be scalable enough to meet your demand.

Bottom Line

VAT implementation has worked as a catalyst to bring landmark changes to IT businesses in GCC. In fact, Majority have chosen cloud ERP systems to ensure total compliance with the new tax regime.

Considering the concurrent implementation of multiple tax policies, adopting a cloud ERP software instead of an on-premise solution will be a wise decision as businesses have to no longer worry about the updating systems in case new laws are amended or surprise provisions are introduced.

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