UAE introduces VAT

UAE set to introduce VAT

Gulf states intend to form GCC-wide customs union

The tax-free environment that so many of us expatriates brought us here, will soon be history. One of the first taxes is about to be introduced in the UAE and entire Gulf region: the value added tax (VAT).

For all those of you who are unfamiliar with the term, VAT is a kind of consumption tax, which the end customer pays when purchasing a product.

No reason to panic

But there is no reason to panic. Experts say that the VAT rate in the UAE is likely to be a low rate between 3 – 5%. Also, key food items (94 items), healthcare, social services, and education services will be excluded from the tax.

The reasons behind the introduction of VAT in the UAE and other Gulf states are the falling oil prices and the plan of the governments to strengthen their revenue streams while becoming less dependent on oil.

Timeline for implementation may be 2018

At the moment, the governments are discussing the details, which will have to be agreed upon through the signing of a common agreement. Once an agreement is reached, the governments will be implementing the tax, which is estimated to take around two years. So the timeline for implementation may be 2018.

The introduction of VAT across the region ties in with the forming of a GCC-wide customs union, which is currently in the planning stages.

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