Dubai: The much-awaited law on valued-added tax (Vat) was issued by the President His Highness Shaikh Khalifa Bin Zayed Al Nahyan on Sunday in preparation for the introduction of VAT from January 1, 2018.
The Federal Decree-Law No 8 of 2017 for value-added tax, comes with one of the lowest rates in the world. The tax rate is fixed at 5 per cent on the import and supply of goods and services at each stage of production and distribution, including what is deemed to be a supply.
“The Federal Decree-Law issued by HH Shaikh Khalifa Bin Zayed is the bedrock of the UAE’s planned tax system, which was designed to meet the most stringent of standards and best practices,” said Shaikh Hamdan Bin Rashid Al Maktoum, Deputy Ruler of Dubai, UAE Minister of Finance and Chairman of the Federal Tax Authority.
VAT, which is set to be implemented across all GCC countries over the next two years, is expected to bring a new revenue stream for the national economy.
“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,” Shaikh Hamdan said.
GCC states are expected to introduce a uniform rate of VAT depending on the readiness of each member state between January 1, 2018 and January 1, 2019 pertaining to the Common VAT Agreement.
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The new tax is expected to have positive impact on the economy, far exceeding its 5 per cent rate, given that revenues will be redistributed to development projects that benefit society at large and accelerate progress.
The UAE Federal and emirate governments provide citizens and residents with many different public services — including hospitals, roads, state schools, parks, waste control, and police services. These services are paid for from the government budgets.
VAT will provide the country with a new source of income which will contribute to the continued provision of high quality public services into the future. It will also help government move towards its vision of reducing dependence on oil and other hydrocarbons as a source of revenue.
The decree-law provides that all supplies of goods and services are subject to VAT at a standard rate of 5 per cent — with the exception of specific supplies subject to the zero rate and what is exempted as specified in the decree-law. Tax imposed shall be the responsibility of a taxable person who makes taxable supplies or what is deemed to be a supply or on import.