Abu Dhabi: The Federal National Council on Tuesday approved a draft law that serves as a framework for issuing tax-related laws.
The bill requires final approval of the President His Highness Shaikh Khalifa Bin Zayed Al Nahyan.
The UAE is likely to see two taxes enacted over the next few years, including a GCC-wide VAT tax and a selective sales tax.
Obaid Humaid Al Tayer, State Minister for Financial Affair, has said the VAT tax would come into effect anytime between 2018 and 2019.
“The GCC members and particularly the countries that have common borders should coordinate with each other concerning implementation of VAT tax, so that no country hurts the economy of the other,” Al Tayer said. He also said the tax could shave off 0.04 per cent of the UAE’s GDP growth when implemented.
Al Tayer said 93 commodities come under the selective sales tax and anyone of them could be exempt.
The list of items include tobacco, soft drinks and energy drinks. Al Tayer said the tax could be up to 100 per cent but will be up to each GCC state to decide the percentage. The minister expects revenue from tobacco products alone to be Dh2 billion annually.
The UAE currently imposes 100 per cent tax on tobacco products. The GCC tax code includes 50 per cent taxes on soft drinks and 100 per cent taxes on power drinks, tobacco and its derivatives.
Asked whether the government plans any corporate tax, the minister said: “Nothing at the moment, we are studying the economic and social impact of corporate tax, but the focus now is on VAT tax and selective taxes.”
The Tax Procedure Bill shall regulate the procedure of assessing, collecting and control of public revenue it applies to, the rights and obligations of taxpayers, registration of taxpayers, and tax offences and violations. This draft law shall also apply to fines, interest on the basis of due but unpaid tax and costs of the enforced collection.
Shaikh Khalifa recently issued a decree setting up the Federal Tax Authority (FTA), which will be responsible for setting up and maintaining records on taxpayers and taxes paid. It will also issue guidelines and clarifications to taxpayers on matters related to federal taxes and related fines.