Paolo Soro

UAE: 3 – 5 percent of VAT in 2018

The spokesman of government has recently confirmed the introduction of Value-Added-Tax (VAT), across the UAE and the GCC, in 2018, at a percentage of 3 – 5.

The Under-secretary at the United Arab Emirates’ Ministry of Finance, Younis Haji Al Khoori, made several comments concerning the VAT introduction, at the sidelines of the first meeting of the Under-secretaries of the Arab Ministries of Finance, organised by the UAE Ministry of Finance in cooperation with the Arab Monetary Fund.

As reported, Al Khoori stated:

“The VAT would be introduced at the rate of between 3 to 5 of the goods’ value, but GCC (Gulf Cooperation Council) countries are yet to finalise their implementation policy”.

With the introduction of the VAT, Al Khoori affirmed that the UAE hopes to earn estimated VAT revenues of up to Dh12 billion, in the first year of its application.

He also asserted that this amount is necessary, after the exemption of imposing tax on sectors such as healthcare, education, social services, and approximately 94 food items that have been agreed by the GCC countries.

As noted, the tax law is currently in preparation stage and the draft law has been approved by local authorities.

The UAE Under-secretary commented that the VAT can be introduced once any of the two GCC countries are ready with their tax laws, and present them to the GCC Secretariat.

Two years, however, are necessary for the adoption the law; therefore, the estimated year for the implementation of the VAT is expected to be 2018.

The introduction of the VAT is considered to be a viable alternative source of revenue for the UAE, pursuant the impact of failing oil prices in recent period on the UAE’s finances. 

As far as concerns other taxes, in a recent interview the Saudi Deputy Crown Prince, Mohammed bin Salman bin Abdulaziz, ruled out the imposition of any income tax in the country, as he stated:

“There are going to be no income taxes, and no wealth taxes,” he said, “We’re talking about taxes or fees that are supported by the citizen, including the VAT and the Sin-Tax”.

According to the information above, we must take note that the Arabic world also, is changing.

Nonetheless, we can state that the certainty of not suffering any direct taxation on income earned, and the favorable tax regime in force in the overall free trade zones will continue to ensure an increase in the number of companies seeking to transfer their business in the Gulf Countries, and, in particular, in Dubai, the most commercial hub around the world.

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