There will be "noteable" set up and compliance costs in collecting and remitting tax to GCC governments as they introduce VAT, Fitch said.
The ministers of finance of the six Gulf Cooperation Council (GCC) states approved an in-principle agreement to provide a common framework to develop national tax regimes in June 2016.
Each GCC country is developing its own VAT regime. While there is a requirement for all GCC countries to have VAT in place by the end of 2018, the aim is to implement it by 1 January 2018 to avoid distortions between those who have and have not implemented a tax regime.
The change will bring uncertainty and operational challenges, but "we expect GCC governments to recognise these challenges and show a degree of flexibility during the initial implementation", Fitch said.
Businesses will need to put new IT systems in place, alongside new procedures and staff training, it said.
Companies that supply goods and services between GCC members or operate within or between free zones are likely to face additional complexities, as agreements between individual GCC members could vary, it said.
The lack of detail in the public domain about how the tax is going to work is hampering the ability of businesses to get ready, said tax expert Jason Collins of Pinsent Masons, the law firm behind Out-Law.com.
"For some businesses, the application of the tax will be relatively straightforward," Collins said. "But for others, such as businesses which deal cross-border, things are likely to get complicated. It may not be clear which country is entitled to the tax under 'place of supply' rules where goods and services cross borders within the GCC, or where a 'third country' or non-GCC business is involved."
"In addition, sectors which are typically treated as 'exempt' under VAT rules in other countries, such as banking, insurance, healthcare and education, do not yet know what system will be in place for them. Exempt businesses are not typically able to claim VAT on their own purchases, which will raise their costs. Businesses may need to look at their structures in order to see whether they can achieve greater VAT efficiency," Collins said.
Even with no VAT exemption, companies may face a cash flow burden from having to pay VAT on purchases and then reclaim it, Fitch said.
"Competition in some sectors may put pressure on companies to cut pre-tax prices and absorb some of the cost themselves," Fitch said. "We believe the lack of any significant historical taxation means it will take time for companies to fully pass on costs, but that they will be able to do so eventually."
The new tax is expected to drive changes in behaviour, said Collins. "Businesses who sell to consumers or another business which cannot claim the VAT back may look at the exemptions and see whether they can restructure to reduce the amount of VAT they have to charge."
"Businesses are likely to make mistakes about accounting for and collecting the VAT and the tax authorities need to make it clear that they will not penalise businesses that bring mistakes to their attention," he said.
The UAE Ministry of Finance published details of VAT registration last week, ready for the introduction of 5% VAT in January 2018.
Registered businesses will be expected to submit VAT returns on a regular basis, and will be required to keep records allowing the government to identify details of business activities and to review transactions, the Ministry said.