VAT Rates in UAE from 2018

                               

The Value Added Tax (VAT) system will be introduced in the UAE and other GCC states from 2018, most probably in January only. The standard tax rate of VAT will be 5% for most products and services, while some specific categories, like healthcare, some food types and education, might be exempted from tax. The government, as well as local businesses, are making required preparations for the implementation of VAT policies.

The UAE officials estimate that the country might generate about 10-12 billion AED in revenues within one year after the implementation of the VAT.

The oil industry of the UAE has witnessed some degrades in the past months and its contribution to GDP has gone down significantly from the previous 90 percent. So, the officials are not positive about getting high revenues from this industry. The real estate sector of the country is also experiencing some decline due to the degrading situation of the oil industry.

One purpose of the VAT is to diversify the economy of the nation. The VAT system is likely to impact the different consumer sectors in different ways, depending on the incomes and the money people are eager to spend on various goods and services.

The VAT rate of 5% in UAE is much lower as compared to VAT in other countries. This, in addition to the tax exemption of certain food items, is not likely to have any diverse impact on the spending ability or desire of the locals.

There are several reasons why VAT is being implemented in the UAE and other GCC countries. The government needs new income sources in order to keep providing good facilities and to promote infrastructure development in the area. The VAT rate has been kept at a lower side so that there is no major impact on the standard of living. Other main reasons behind the VAT implementation are the recovery of the country’s economy, reduction of their dependency on petroleum products and building and maintenance of national wealth.

VAT is expected to bring many reforms in the existing tax system in the country. The officials are struggling with the issues regarding the implementation of these reforms. These issues, including the issues with budget and influence of oil prices, have been discussed several times before and now, these are rising again.

The VAT implementation issues and legal concerns are being dealt by the UAE government to ensure a smooth transition to the new tax system. The minor tax rate will ensure that it doesn’t have any significant impact on the lifestyle of the UAE residents. The implementation of VAT in the UAE will ease the pressure caused by the country’s tax-free mechanism and will put it in line with the international tax standards.

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