VAT Introduction in UAE
The UAE will implement value tax (VAT) at the rate of five percent from January 1, 2018.
The introduction of a value-added tax (VAT) system in the UAE will not just affect consumers, it will also have a broader impact on businesses as well. Some business owners might require more time to get acquainted with the new system or revamp their financial systems and operating structures. Entrepreneurs must now look at the suppliers for the goods and services they use to run their business, in order to determine the impact of VAT. Whether or not it's necessary to invest in additional manpower to facilitate tax collection is another area to look into. Business and merchants will need to incorporate VAT into their accounting systems and will need to keep accurate record to demonstrate to the tax authority that they have correctly applied the VAT rules. IT systems will form an important part of this process and in larger organisations, a fully automated tax engine will likely be a necessity.
VAT at a glance:
The initial rate of VAT is likely going to be between 3-5%
Staple food items, healthcare, education, and social services exempted from VAT
A key decision to stabilise the economy which is less reliant on oil income
VAT will be introduced across the GCC region, and only in the UAE
The retail sector will be protected, with price increases not giving too much of an impact for the middle and low income group