What you need to know about VAT in UAE
Value Added Tax
VAT shall be implemented across the UAE from the 1st of January 2018, at the rate of 5%. It Includes Individuals, Companies, and institutions during the purchase of goods and services. In addition, GCC countries have agreed to implement VAT, which is equivalent to Twenty-five billion dollars generated by VAT every year.
Companies across UAE have reported annual revenues of over AED 3.75 million, will be obliged to register under the GCC VAT system, authorized by The Undersecretary of the UAE Ministry of Finance Mr. Younis Alkhoury. It also has also been confirmed with regards to the companies’ revenues falling between Dh1.87 million and Dh 3.75 million, they have the option to register for VAT during the first phase of the VAT implementation period.
In addition, he has also mentioned that it will be compulsory for UAE companies to be registered under the system, when it been rolled out in the second phase, regardless of the reported revenue.
Why is VAT being considered by the GCC?
The government has been considering the need for diversified sources of income and this case has given negative developments affecting government revenue in the region such as reduction in income from oil.
Jewelry, Electronics, vehicles, restaurants, and entertainment will fall under the taxation category. GCC countries are also expecting to introduce excise duties on certain beverages which is deemed to be harmful to health, including beverages having high sugar content.
Will the 5% VAT increase the cost of living in UAE?
The cost of living in UAE will go up slightly for some people, which depends on individual’s purchase and lifestyle preferences.
When will registration for VAT begin?
If the initial date of VAT roll out is followed, businesses can probably start registering for VAT from 1st of October 2017. As announced, the registration will be open three months prior to the date of actually implementing the VAT System. Companies have an option of registering themselves online.
Reference: Article 2 (How does VAT work?): http://www.khaleejtimes.com