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UAE to introduce guidelines on VAT in 2018

Tax experts are signaling that the UAE is about  to make an  announcement on the implementation of VAT at an introductory rate of 5%. All six members of the GCC agreed earlier in the year that to alleviate falling oil revenues VAT as a revenue generating taxation scheme would need to be put in place by 2018.

While some GCC countries are yet to develop  a framework for VAT revenue collection the UAE is relatively further advanced in this arena and would be in a position to press ahead with legislation in the absence of other jurisdictions passing the necessary laws.

A UAE finance minister has been quoted by media as forecasting that revenue from VAT in its first year of application could generate an income of up to 12 billion dhs. The attraction of revenue  sourced via implementing VAT on goods and services is that this form of taxation is of an indirect nature and therefore will ultimately be borne by the  consumer.

Challenges lie ahead though as the GCC needs to establish a unified policy in order to avoid some member countries gaining an unfair advantage over others in cross border trade. Closer to home it remains to be seen how or whether VAT will be applied in the various Free Zones in the Emirates which predominantly advertise themselves as tax free havens.

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