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VAT will be introduced in the UAE in January 2018

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Last month we reported that Value-Added Tax (or VAT) would be introduced in the UAE in 2018. However, the exact date that it would arrive or the official rate had not been decided. On Wednesday Obaid Humaid Al Tayer, UAE Minister of State for Financial Affairs, put an end to speculation and announced that a VAT rate of 5 percent will be introduced across the UAE starting on January 1 2018.

“The percentage will be 5 per cent,” he confirmed. “As per the GCC Supreme Council resolution, VAT will be implemented as of January 1, 2018.”

This come as part of a wider plan to implement VAT across the GCC, however, the timeframe for other countries may differ. Al Tayer explained that other countries may choose to introduce VAT at the same time, or wait until January 1 2019.

The Ministry of Finance previously said that this is expected to generate between AED10 billion and AED12 billion in revenue during its first year. This projected figure excludes sectors like healthcare, education, and 94 food items, which are all exempt from VAT.

As for other forms of tax, it seems that the rumours about income tax are untrue. In December, Obaid Humaid Al Tayer spoke at the Federal National Council, saying: “There is no intention and no plans to impose taxes on the income of individuals in the UAE.”

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Other GCC countries seem to be taking a similar approach. Saudi Arabia’s Deputy Crown Prince, Mohammed bin Salman bin Abdulaziz, Second Deputy Prime Minister and Minister of Defense, also has spoken out to say that the country has no plans to implement income tax.

The UAE is, however, looking at tax reforms. One possible move that the government is exploring, according to Gulf News, is taxing remittances that foreign workers send home, although it has been noted that this would need significant studies and no plans are currently in place.

Another area that is being explored is corporation tax. “We are still studying the corporate tax law, which is still in its initial stages and it is being discussed with local governments and no agreement has been reached so far,” said Obaid Humaid Al Tayer.

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