UAE will attract people despite VAT, say experts
The UAE is not going to lose its charm for expatriates after the implementation of Value Added Tax (VAT) as the country will continue to attract people from across the globe for work, business, leisure and medical tourism. The VAT will be introduced in the country from January 2018 and it will be charged at five per cent only. In many countries it's as high as 25 per cent. The UAE will remain tax free in many ways even after the implementation of VAT as there is no income tax on salaries in the country. Free zones in the country also offers tax free environment including 100 per cent foreign ownership in free zones, ease of doing business.
"Considering the lifestyle on offer in the UAE for all sections of the society, I do not feel that VAT will lose it charm for the businesses; old and new," Atik Munshi, partner at Crowe Horwath, UAE, told Khaleej Times.
Munshi explained though initially the VAT introduction may seem like a deterrent to the business, there are a host of other benefits which the UAE offers to its business community.
An introduction of a small five per cent shall not dampen the spirit or competitive edge of the UAE business particularly when such VAT is going to be introduced nearly simultaneously in all of GCC, he added. Dr Nasser Saidi, president, Nasser Saidi & Associates, said a favourable tax structure is only one of the many features that attracts expats to the UAE. The five per cent VAT is a low level of taxation and unlikely to have an impact on those considering a move to the UAE.
"Factors like liberal immigration policies, job opportunities, world-class infrastructure and logistics, its free-zones, pro-business climate, rule of law, 100 per cent foreign ownership in free zones, ease of doing business in the region are more important and have helped UAE become a hub for doing business in the wider Mena and South Asia region," said Saidi, who is also former chief economist at Dubai International Financial Centre.
Shan Saeed, chief economist at IQI Holdings Malaysia, commented: "The UAE will remain a safe haven in the global financial market and economic confidence will keep the expatriate coming back to the country." CA Krishnan Ramchandran, CEO of Dubai-based Barjeel Geojit Securities, said VAT is also expected to bring in more transparency in the overall business and services environment in the region. Amer Khansaheb, CFA, President of CFA Society Emirates, said: The short-term impact will be offset by the long-term benefit VAT will bring to the regional economies. VAT will encourage more responsible consumer spending patterns and prices will have to be reduced in order for demand to match this trend; which would eventually lead to a decrease in inflation rates." CFA Society Emirates, the association for financial and investment professionals in the UAE, had unveiled the results of a survey last month that assessed the impact of introducing VAT across the GCC. Nearly 60 per cent of the professionals stat- ed that the GCC's tax-free environment was an influential factor in their decision to move to the region. An eighty per cent said that they would consider moving abroad if an income tax is introduced in the GCC. Around 60 per cent professionals were confident that the introduction of a corporate tax would not cause companies to relocate.
More than 50 per cent were of the opinion that the number of expats living in the region will stay the same once VAT is applied, while 47 per cent thought that the number of expats will decrease.
Many of the respondents believe that forms of indirect taxation already exist; 86 per cent sighted hotel taxes as an example, 79 per cent affirmed road tolls were another, while 60 per cent identified parking and car registration charges as one.