Taxman’s burden not too heavy
▶ Compared to other places, VAT in the GCC will be tolerable
The taxman is coming to the UAE and the laws to make his job easier are being laid out.
Businesses have more insight now into the shape of taxes with the publication of the Tax Procedures Law, which defines the rights and obligations between tax payers and the Federal Tax Authority, which was created last year to administer levies.
The law will be implemented 30 days after its publication in the official gazette
So far only two taxes have been announced: a GCC-wide 5 per cent value-added tax that will be implemented in the UAE starting January 1, 2018, and excise taxes to be introduced in the fourth quarter this year at a rate of 100 per cent for tobacco and energy drinks and 50 per cent for sugary fizzy drinks.
By far, the UAE’s nascent tax regime sits in a region that has the world’s lowest tax rates, according to PwC’s 2017 Paying Taxes Report. The main taxes in the UAE are corporate taxes levied on certain foreign companies in the oil sector and branches of foreign banks.
The VAT rate is also low compared with even global regional standards. For example, Morocco’s rate is 20 per cent.
As more laws are published,
The implementation of the GCC-wide tax is expected to boost GDP by about 1.5 per cent, according to the IMF
particularly the VAT and excises tax laws, taxpayers will get more clarity on the type of goods and services that will be subject to taxes.
The finance ministry has already identified sectors that will be exempt from VAT.
For example, residential property in the UAE, some financial services, undeveloped land and local transport will be exempt from VAT.
With these exemptions, consumers will be protected from financial burdens that may arise from the levies and the government can continue its spending programmes which are needed to keep the economic engine going.
The implementation of the GCC-wide tax is expected to boost GDP by about 1.5 per, according to the IMF.
In the UAE, VAT could generate Dh12 billion in its first year and Dh20bn in its second year, according to Sultan Al Mansouri, the Minister of Economy.
Tax proceeds are needed in this era of low oil prices. At their current low rates they will help maintain economic growth by providing the government with a new revenue stream.
The taxman may come, but his bag will still be light.