UAE President approves VAT law as sectors prepare
The UAE has approved a law to introduce a 5% Value Added Tax (VAT) set to be implemented on 1 January, 2018
The UAE has approved a law to introduce a 5% Value Added Tax (VAT), set to be implemented on 1 January, 2018.
President of the UAE HH Sheikh Khalifa bin Zayed Al Nahyan officially signed the Federal Decree-Law Number 8 of 2017, which will set the general rules for the implementation of the new tax and includes details on the goods and services subjected to VAT, as well as those exempted, according to WAM.
The law’s regulatory framework, which was signed earlier this year, will reveal more details of the law when it is released by the fourth quarter of the year.
In an official statement, Sheikh Hamdan bin Rashid Al Maktoum, Deputy Ruler of Dubai, UAE Minister of Finance and Chairman of the Federal Tax Authority, said: "The Federal Decree-Law issued by His Highness Sheikh Khalifa bin Zayed Al Nahyan is the bedrock of the UAE's planned tax system, which was designed to meet the most stringent of standards and best practices.
"The Value Added Tax, which is set to be implemented across all GCC countries over the next two years, will bring a new revenue stream for the national economy and GDP. This, in turn, will ensure consistency in the high quality of government services, to mirror the UAE's advanced position on several global competitiveness indexes.
"The new tax system will provide extra support for the Government to implement the vision of the UAE leadership and build a diversified and productive knowledge economy," he added.
The law will also outline a list of exclusions to the tax, including housing exemptions and a 0% rate on education, according to local UAE media outlets.
For the construction and property development sectors, VAT will impact the contract price in construction contracts as well as construction material costs, resulting in an uptick in overall pricing.
Residential property and bare land will be exempt from the tax, but commercial real estate will be standard rated, or fully subject to the 5% tax.