UAE to introduce ‘world’s lowest VAT’
The United Arab Emirates (UAE) is to introduce a value added tax (VAT) levy from January 2018 for the first time — but is softening the blow by setting the rate at what it says will be one of the world’s lowest.
UAE finance minister Sheikh Hamdan bin Rashid Al Maktoum who is also deputy ruler of Dubai and chair of the Federal Tax Authority, said the rate has been set at just 5%, low compared with rates in, say, Europe that average around 20% as with the UK (Switzerland at 8% is Europe’s lowest, with Hungary the highest at 27%).
He described the new levy as becoming “the bedrock” of the UAE’s planned taxation system, and revealed that the move is happening in concert with the five other members of the Gulf Cooperation Council — Saudi Arabia, Qatar, Bahrain, Kuwait and Oman — and will be rolled out in tandem across the region.
The move is being seen as another step in the development of other revenues for the state to reduce overdependency on oil revenue as traditional markets look to clean technology and renewable forms of energy.
The Ministry of Finance said in a statement that that all supplies of goods and services will be subject to VAT at a standard rate of 5% with the exception of specific supplies for which a zero rate will be applicable.
Zero rating will apply when goods and services are being exported outside the GCC and to international transportation of passengers or goods, supplies of crude oil and natural gas and to education and health services.
--- International Investment