Is it the end of tax heaven? VAT is enacted in the UAE in 2018
According to the statement of the Ministry of Finance of the UAE, 5% VAT will be enacted in the economy from 1st January, 2018.
Actual measures are caused by drop in oil price, and the UAE are planning to develop new revenue items of the region performing these actions. It is expected to get AED 12 million of profit received from taxes only during the first year of VAT enaction.
Generally, 5% VAT introduction corresponds to the resolution that was published by the Gulf Cooperation Council and determines allocation of the rate for 1st January, 2018.
It should be added that the spheres of education and health service and 150 commodity groups of food will be exempted from taxes.
Also, according to the statements, the resolution obligates the members of the Council to be free in implementation of VAT levy procedure during 1 year by January 1st, 2019. As considered, this measure will allow checking readiness of the countries to introduce new tax obligations.
The International Monetary Fund has already delivered the statement and resumed that VAT in the Persian Gulf region is able to raise the level of income to the volume which is equivalent to 2% of GDP.
Nowadays, VAT imposing is one of the main components of economic reforms for the countries included in the Gulf Cooperation Council that have minimal tax rates and do not have income tax.
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