Why UAE will remain tax-free despite VAT

Experts say 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 offer a tax-free environment, including 100 per cent foreign ownership in free zones besides the ease of doing business.

Moreover, companies in the UAE whose revenues fall between Dh187,000 and Dh370,000 will have the option to register for VAT during the first phase of the VAT implementation. But companies that report annual revenues of over Dh370,000 will be obliged to be registered under the VAT system.

Jeanine Daou, PwC Middle East Indirect Tax Leader, said VAT is expected to be levied on the manufacturing sector except for a limited number of commodities which will not be subject to VAT.

“Also, most international companies in the manufacturing sector have their operations in the fenced free zones such as Jebel Ali Free Zone (Jafza). It is expected that supplies made by companies operating in fenced free zones such as Jafza will not be subject to VAT. The new levy would most likely apply on supplies from the free zone to onshore the UAE,” Jeanine Daou said.

It is expected that supplies made by companies operating in fenced free zones such as Jafza will not be subject to VAT. The new levy would most likely apply on supplies from the free zone to onshore the UAE.” Jeanine Daou, PwC Middle East Indirect Tax Leader