The big question of whether or not taxes will ever be implemented in the UAE will soon be answered. The question now is ‘when’ and not ‘if’ anymore!
As per latest reports, the UAE will start implementing a value added tax (VAT) rate of five percent from January 1 2018; however, corporate and income taxes are not under consideration for the time being.
VAT is a type of consumption tax that the customer pays while purchasing a product.
The rate of this Dubai tax (VAT) rate is likely to be a low rate of 5 percent, in line with the recommendation of the International Monetary Fund (IMF). The IMF has been advising experts on the need to introduce tax in UAE and other GCC countries to strengthen their revenue base in the wake of fluctuating global oil prices.
The good news is that the impact of such a low rate of five percent Dubai tax on corporates and end users may not be huge, quite negligible and only be compliance-related, experts say.
However, businesses will have to take the cash-flow impact of this tax in UAE into their day to day activities – something that those involved in projects with tight margins should consider carefully. The ones that will generally bear the cost are likely to be individuals as businesses may lessen the impact by including some of the tax in Dubai VAT charge into their profit margins.
It seems like personal tax is not on the Dubai tax agenda at the moment at least, as the introduction of VAT should keep income tax concerns at bay. Plus, it is unlikely that tax in UAE would see VAT and corporate tax introduced simultaneously in the country – as it would pose a major challenge given that the UAE has had no pre-existing taxpayer database.
Henri was born and raised in Lebanon and studied at University of Saint Joseph. He is an avid fan of extreme sports and RC car racing. He is fluent in French and Arabic, he has traveled extensively throughout the region and Europe for both for leisure and business.