GCC countries to implement VAT in January 2018
Along with the UAE, Saudi Arabia, Kuwait, Qatar, Oman and Bahrain will adopt the new tax which will act as a way to increase non-oil revenues
Six GCC countries are planning on simultaneous adaption of the VAT tax in January 2018, a UAE official said.
Along with the UAE, Saudi Arabia, Kuwait, Qatar, Oman and Bahrain will adopt the new tax which will act as a way to increase non-oil revenues during a time of economic slowdown due to low oil prices, Arabian Business reported citing Reuters and Zawya.
Younis al-Khouri, under-secretary at the UAE finance ministry, said: "By 2018, 1 January, we are aiming to adopt 5% VAT across the GCC.”
The minister said that the government was aiming for a 5% rate across the board, though it may not be as strict for some sectors, namely education, healthcare, renewable energy, water, space, transport.
Authorities will seek to register all companies with annual revenues exceeding $100,000 for the tax, and anticipate 95% or more of companies will comply in the initial stage.
The UAE government is expecting around AED12bn ($3.3bn) of revenue from the tax in its first year alone, which is about 0.9% of the UAE's gross domestic product of $371bn in 2015, data shows.
Khouri added that revenues from the tax may increase gradually with economic growth, though the government is not at present considering any increase of the tax above 5%, and would not raise it in the future without a thorough study of the economic and social impact.
The UAE has been working on a debt law that would allow the federal government to issue sovereign bonds, which once passed, will allow the federal government to start issuing debt within six months.
However, minimal budget deficit means the debt will not be used to fund the budget, but Instead will be issued in conjunction with the central bank to manage liquidity in the banking system, Khouri said.
No specific date has been confirmed as to when the law, which was initially scheduled to be finalised by the end of last year, will be passed.