UAE plans 5pc VAT across the board

March 2017

The UAE plans to implement a 5 per cent value added tax (VAT) rate across the board from January next year, a senior official was quoted as saying.

“There might be areas where we will adopt the zero-rated but currently, as the Ministry of Finance we are not aiming towards exemptions, which could create some leakages, some confusion,” said Younis Al-Khouri, under-secretary at the UAE finance ministry, in a bReuters interview.

Parts of seven sectors – education, healthcare, renewable energy, water, space, transport and technology – might get special treatment, he said in the report.

The UAE is expected to obtain around Dh12 billion ($3.3 billion) of revenue from the tax in its first year. That would be about 0.9 percent of the UAE’s gross domestic product of $371 billion in 2015, according to official data.

From the start, authorities will seek to register all companies with annual revenues exceeding $100,000 for the tax, and anticipate 95 percent or more of companies will comply in the initial stagem, the report said.

Revenues from the tax may increase gradually with economic growth but the government is not at present considering any increase of the tax above the 5 percent amount, and would not raise it in the future without a thorough study of the economic and social impact, Khouri said.

He said all GCC governments were planning for early, simultaneous adoption of VAT.

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