The Value Added Tax will officially take effect in January next year in the United Arab Emirates and the Gulf Cooperation Council states. According to the UAE Ministry of Finance, the GCC states have already completed all the necessary legal prerequisites to establish a uniform GCC tax policy ahead of imposition of the Value Added Tax. The VAT consultancy Dubai is here to answer all the questions arising out of the uncertainty on the issue.
The UAE government expects to fetch around 10 to 12 billion U.S. dollars a year after the imposition of VAT. This will provide additional cushion to the rulers to ensure and maintain the high quality of life in the Emirates and the GCC. It is merit mentioning here that some of the healthcare and educational segments as well as some types of food will be exempted for the VAT.
The whole idea behind the VAT imposition is to diversify the UAE economy as oil can’t feed the national economy alone anymore. The decline in international oil and crude prices have further demeaned the significance of oil industry on the UAE economy. When the authorities had announced the VAT imposition, it was widely feared that it will affect the salaried class and businesses and their buying power will reduce considerably. However, the VAT was announced at 5 percent which means it will have little or no impact on the purchasing power of the people who are operating business or doing jobs in the United Arab Emirates. Moreover, certain food items will remain tax-free, which means dining out will remain within the realms of pocket-friendly adventure for families even after the VAT imposition.
Analysts are of the belief that the VAT at 5 percent rate will have no major negative impact on the social standard of living across the Emirates. It is important to mention here that the imposition of Value Added Tax was suggested by the International Monetary Fund (IMF) a long time ago. The suggestion was aimed at bringing the UAE at par with the international practices and reduce likely pressure on its tax free regime.
The United Arab Emirates in general and Dubai in particular have long been considered the tax free regions where expatriates enjoyed tax free salaries for the past many decades. All this is going to change in about four weeks but its impact will not be as gigantic as was feared initially. The tax consultancy company UAE has more insights on the issue.