VAT Rates in Dubai
Introduction of the Value Added Tax (VAT) in Dubai with the rate of 5% starts from beginning of 2018. According to the recent information of the UAE’s Ministry of Finance, this tax is implemented from 2018 in the UAE as well as across the GCC in 2018. Before implementing of the VAT, the GCC states have made the necessary work to establish the common GCC tax policy.
The revenues from VAT in the UAE are expected to be 10-12 billion AED just after the first year of collection. That is meant without specific healthcare and educational segments that will be exempted from taxation as well as some type of food.
The officials of the UAE want to diversify the national economy. They do not expect getting higher revenues from oil industry, as its contribution has gotten down from 90 percent of GDP to really lower rates. This situation with oil prices decline also affected the real estate sector.
Analysts notice that the VAT systems can influence consumers in the UAE in many different ways. It all depends on their incomes and an amount of money, which they are ready to spend on goods and services.
The VAT rate of 5% seems to be quite minor, regarding the purchasing power of people and the fact that certain food items will remain tax-free. Such tax rate shall not strikingly can shrink consumer spending ability.
The issues of tax reforms implementation have been previously discussed in details in all the member states of the Gulf Cooperation Council (GCC). After a feasibility study concerning the corporate taxes and the VAT implementation took place at the beginning of 1990s, the discussion concerning this issue was stopped for a while. Taking into account the difficulties with budget, influenced by oil prices, it is becoming a topical issue again.
This tax reform in the UAE is necessary because some new sources for getting revenue in the UAE are necessary to provide good quality of life and further infrastructure development. Analysts say that the VAT rate of 5 % will have no negative impact on the social standard of living. Introduction of the VAT aims at recovery of the UAE economy, maintenance of the national wealth and reduction of reliance on the petroleum products.
The Government of the UAE fine tunes all the legal aspects and considers all the possible related concerns of the VAT introduction. Its implementation will not negatively affect the life of UAE residents due to its minor rate. The implementation of the VAT was long time suggested by the International Monetary Fund and its introduction puts UAE in line with the international standards and eases potential pressure on its general tax free environment.