UAE to introduce 5% VAT on 1 January 2018
The GCC has long planned to adopt VAT as a way to increase non-oil revenues, but economists and officials in some countries have speculated that simultaneous introduction in all countries may not be feasible. This primarily is as a result of the complexity of creating the administrative infrastructure to collect the tax and the difficulty of training companies to comply with it, in a region where taxation is minimal.
Younis al-Khouri, under-secretary at the UAE Ministry of Finance said some sectors in the UAE might be exempt from the tax in order to reduce fiscal challenges on the economy, Khouri commented that the government was aiming for a 5% rate across the board but parts of seven sectors – education, healthcare, renewable energy, water, space, transport and technology – might get special treatment. “There might be areas but currently, as the Ministry of Finance, we are not aiming towards exemptions, which could create some leakages, some confusion.”
Khouri commented the government expected around 12bn dirhams ($3.3bn) of revenue from the tax in its first year. That would be about 0.9% of the UAE’s gross domestic product of $371bn in 2015.
Business in the UAE will be able to register online for value-added tax (VAT) from October 2017 and subsequently file returns on a regular basis. Businesses will be required to keep records that will allow authorities to identify the details of the business activities and review transactions. Specifics regarding the documents required and the time period for keeping them haven’t been revealed.
