The VAT system is designed to become the “bedrock of the UAE’s planned tax system”, according to Sheikh Hamdan bin Rashid Al Maktoum, deputy ruler of Dubai, UAE Minister of Finance and chairman of the Federal Tax Authority (FTA).
VAT is due to be introduced across the Gulf Cooperation Council region between January 1, 2018, and January 1, 2019, as part of efforts by the six member states to shift from an over reliance on oil revenues. The GCC includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia as well as the UAE.
“The new tax system will provide extra support for the government to implement the vision of the UAE leadership and build a diversified and productive knowledge economy,” he added.
“The tax will have positive results on the economy given that revenues will be redistributed to development projects that benefit society at large and accelerate progress until the UAE reaches the top of global rankings across all sectors,” said Hamdan.
The new law imposes a standard VAT rate of 5% on all goods and services not specifically exempted or zero rated. It does, for example, exempt residential properties and rent paid to landlords, and the transfer of whole or an independent part of a business for the purposes of continuing such business.
The decree requires all UAE residents or business entities to register for VAT unless they fall under a minimum annual turnover limit as defined by the tax authority. The government has previously signalled that companies with an annual revenue of over AED3.75m ($1.0m, £800,000) will be obliged to register under a Value Added Tax (VAT) system and charge the tax.
