Certain companies in the UAE will now have to register under the Value Added Tax (VAT) system once it commences. Companies that earn more than Dh3.75 million in revenue on an annual basis will now be taxed accordingly. During the first phase of the introduction of the VAT system, companies that have revenues ranging from Dh1.87 million to Dh3.75 million will be given the option to either register under the system or choose not to.
Once phase 2 commences all companies will be required to register themselves under the VAT system, however the date of this is still being discussed by the ministry.
In 2018, the rate of the VAT tax will be 5 per cent
According to Oman’s Minister of Financial Affairs, Darwish Al Beloush, GCC countries have come to an agreement on VAT being introduced at the rate of 5 per cent in 2018
Many of the implementation policies have not yet been finalised but The GCC countries have come to an agreement on the certain industries such as education and health care that won’t be taxed under the VAT system. It is also confirmed that VAT will not be imposed on staple food items.
During the first year of introducing the VAT system in 2018, it is expected to help generate an amount of Dh10 billion to Dh12 billion in revenues from the tax.
In order to help GCC countries generate more government revenues, many organizations and economists, including the International Monetary Fund (IMF), had recommended that introducing tax would be the best option. It became the optimal approach as oil prices started declining during mid-2014 by Dh422.2 a barrel to early 2016 at under Dh110, which caused the government revenues to drop significantly. The IMF said oil-exporting countries in the Middle East and North Africa lost over $340 billion in oil revenues in 2015, which is collectively 20 per cent of their gross domestic product.