The tax complexity in UAE, before and after VAT

The UAE has secured top position across the globe in respect of ease of payment of taxes, it happens due to lesser taxes imposed in the country. However, experts are not sure about the upcoming VAT regime and what its effects will be on the country’s ranking in terms of tax complexity. The government authorities are trying their level best and have set-up digital platforms and regulations to provide assistance under the new regime.

According to the report, named the Paying Taxes 2018, released by World Bank and PriceWaterhouseCoopers, as of now, to file taxes in UAE, it hardly takes only 12 hours as compared to other countries; 29 hours in Bahrain, 47 hours in Saudi Arabia, 55 hours in Luxembourg, 63 hours in Switzerland and 64 hours in Singapore

''We will have to see after the VAT implementation whether it affects the country’s ratings. To my understanding, the VAT filing and payment are going to be electronic; even the procedures are based on the best practices for quick VAT refund and risk-based audit. We expect the position of UAE to remain strong''. An expert said.

In spite of the fact, the UAE is a newcomer in the VAT law, the country has adopted simplified, logical rules and regulations under VAT.

“This has been done by maintaining a single rate of taxation at five percent and keeping very limited activities in the zero-rated and exempt category. Also, the tax return mechanism is very simple where the information required is at a summary level. The tax authorities have facilitated an online return filing mechanism making it convenient to file the return”, said Chand.

Joanna Nasr, Paying Taxes leader and private sector development specialist, World Bank, said that it is uncertain how VAT Law will affect the UAE’s country rankings on ease of payment of taxes – where it secured 21st position. But the government authorities are going in the right direction and have established the digital platform for filing returns and taxes under VAT law.

The report revealed by World Bank examines the complexity (and ease) of tax payment process in 190 countries. It reveals that 162 out of all countries have implemented a VAT system, with only 107 economies providing the facility of VAT refund. There is no VAT refund service in 51 economies, including South America and Africa.

According to the report of Paying Taxes, the time taken in payment of taxes is about 240 hours on the worldwide level, 195 hours in Arab League and 161 hours in European Union countries.

The UAE has secured high rankings in terms of filing returns due to fewer taxes levied in this country as compared to other parts of nations.

“We’ll see how the whole system is implemented in terms of compliance and how easy online platform is going to be for the filing of tax return, and what is the data that is needed, and how quickly companies can submit data. All this will matter.” The UAE government is working to simplify the taxation process under VAT and will start the digital platform for filing returns and taxes.

According to the reports, it is identified that the UAE presently maintains a strong position in respect of number of payments at four- which is considered second best across the globe – after Saudi Arabia (3) – and ahead of Singapore (5), New Zealand (7), Switzerland (19) and Luxembourg (21). The above ratings are in comparison with an average of 8.7 payments in GCC, 12 in European Union (EU) countries, 20.5 in Arab League and 24 Globally.

The Gulf Cooperation Council (GCC) carried out well in terms of filing returns in ease of payment of taxes in the regional countries. After the implementation, VAT will enhance the number of taxes in UAE, and also may have a positive impact on payment and time parameters.
So far, the Middle East is the easiest area in terms of filing taxes. It happens only due to advanced technology and innovation, which reduces the burden of tax compliance for the businesses.