16/08/2017 07:04 AST

The UAE and Saudi Arabia will be the first countries in the Gulf Cooperation Council (GCC) to introduce Value Added Tax (VAT) from January 1 next year, a senior government official said on Tuesday.

“The UAE and Saudi Arabia will be the first countries to roll out VAT in the GCC from early 2018 while other Gulf countries have time till the end of next year to implement the new tax system,” said Khalid Ali Al Bustani, Director General of Federal Tax Authority (FTA), at a press conference in Abu Dhabi on Tuesday.

The rate for VAT is set at 5 per cent whereas excise tax will be 100 per cent on tobacco and energy drinks and 50 per cent on soft drinks excluding sparkling water. All business that meet the minimum annual income of Dh375,000 as confirmed by their financial records are required for compulsory registration with the VAT system. The new tax laws and procedures are expected to strengthen the UAE’s economic development and enable it to be a real competitor among the world’s advanced economies, he said.

“This will be led by providing resources to support the expansion of key sectors that are related to the community and providing the best services especially in the fields of health care, education and infrastructure projects,” Al Bustani said. “The application of the tax system will not affect the country’s competitiveness because it is among the lowest in the world.”

The FTA, along with the Ministry of Finance, conducted the first phase of the awareness sessions on the tax system for various business sectors and relevant stakeholders from March to May 2017, which witnessed the strong participation of more than 15,000 companies from different business sectors operating in various emirates.

They have also recently launched the second phase of the tax system’s awareness plan, which focuses on conducting 21 specialised workshops on the VAT and excise tax treatment of the different business sectors, in cooperation with institutions and government authorities such as Chambers of Commerce.

Around 350,000 firms under VAT in UAE The workshops will specifically address the retail sector, real estate, imports and exports, and the financial services and insurance, FTA said.

“Tax is a new concept in the UAE community and the region. It is important to emphasise the great role of our strategic partners in raising awareness of tax procedures and ensuring the success and excellence of the UAE tax system,” Al Bustani said.

“The UAE has the lowest rates, and is the most competitive globally with a rate of 5 per cent on the supply of goods and services. The success of the UAE tax system is, therefore, a shared responsibility and requires strategic cooperation based on three pillars, the government, the business sector and the community,” he added.

The new tax system comes as GCC governments struggle due to low oil revenues in the last three years.

Last month, President His Highness Shaikh Khalifa Bin Zayed Al Nahyan has issued the landmark Federal Law No. 7 of 2017 for Tax Procedures, which sets the foundations for the planned UAE tax system, regulating the administration and collection of taxes and clearly defining the role of the Federal Tax Authority.


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