DUBAI: The UAE will bring into force value added tax (VAT) at the rate of five percent from January 1, 2018, Obaid Humaid Al Tayer, UAE Minister of State for Financial Affairs, has revealed.
The minister was addressing the media during a joint press conference on Wednesday with Christine Lagarde, Managing Director of the International Monetary Fund (IMF), in Dubai, Gulf News reported.
GCC countries had recently arrived at a consensus to introduce VAT at a rate of five percent in 2018. The framework agreement on the implementation of VAT across the GCC is expected in June this year, the report said.
“Once the framework agreement on implementation of VAT is reached, GCC countries have time from January 1, 2018to January 1, 2019 to implement VAT,” Al Tayer reportedly said.
The minister added that each country has the flexibility to introduce VAT within this time frame.
“A lot of ground work needs to be done before implementing VAT. The private sector will need time to prepare for complying with tax rules that is the reason we are giving enough time for all,” Al Tayer was quoted as saying.
The UAE will impose five percent VAT while exempting 100 food items, healthcare and education. In the first year, the country is expected to generate Dh12 billion from tax revenue, said the news portal.
GCC countries have decided to implement taxation as part of governments’ efforts to diversify revenues in the context of sharp decline in oil prices, it said.
The IMF has been recommending fiscal consolidation in the GCC through diversification of government revenues and reduction of subsidies, Gulf News reported.
The IMF official reportedly said indirect taxation in the form of VAT in low single digits is the most viable option for GCC states in the first stage of taxation as implementation of direct taxes require a fairly well developed institutional framework.
Source: The Filipino Times