The UAE will have one of the lowest VAT rates in the world

Posted on Nov 29, 2017

The UAE will have one of the lowest VAT rates in the world

The UAE will take its first step towards implementing VAT in the nationon 1st  October 2017, when between 50% and 100% tax will be added to cigarettes, tobacco and sugary drinks but UAE will implement VAT from 1st January 2018 at a very low rate of 5%.

UAE is all set and ready to welcome VAT in the beginning of the very next year (1st January 2018) as it is a consumption tax and it is already implemented in various countries though mechanism is same with little variations accordingly. VAT is an indirect tax on consumption and it applies to most goods and services and is levied on business transactions, i.e. on goods and services supplied in the course of business

As several European, Asian and African countries have introduced Value Added Tax long before, the expat community here are familiar with it and its quite higher rates where The UAE along with other Gulf countries will introduce the VAT for the first time in January 2018 at a standard rate of 5 %.

UAE finance minister Sheikh Hamdan bin Rashid Al Maktoumdescribed the new levy as becoming “the bedrock” of the UAE’s planned taxation system, and revealed that the move is happening in concert with the five other members of the Gulf Cooperation Council — Saudi Arabia, Qatar, Bahrain, Kuwait and Oman — and will be rolled out in tandem across the region. “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.

Comparison with other countries:

INDIA: India implemented VAT in most of the estate from April 1, 2005 and replaced the sales tax regime, the VAT is categorized in 5 broad categories from 0% to 20% where 12.5 was kept as standard rate, this rate applies to all supplies of goods unless a different rate is specified in law.

Some goods are kept exempt means they are not taxable under VAT such as fruits and vegetables, agricultural implements and books. There is 1% VAT on gold, silver and other precious metals and articles made of such metals and Medicines, intangible goods, industrial inputs, information technology products and telephones are subject to 4 % to 5.5 % VAT.

PAKISTAN: Sales tax was introduced in the country on November 1, 1990 which is a modified form of VAT wherestandard rates are 17 % for goods; 16 %, 15 % and 14 % are for services. 17 % is imposed on the value of the supply of goods or at the import stage.

Most services are taxed at 16 % in Punjab and Islamabad, 14 % in Sindh, and 15 % in Khyber Pakhtunkhwa and Balochistan. However, telecommunication services are taxed at 18.5 % in Islamabad, 18 % in Sindh and 19.5 % elsewhere in the country.

EGYPT: In Egypt the standard rate is 10% where some goods and services are charged with different rates ranging between 1.2 % and 45 %, construction activities are subjected to 1.2% to 10%. Cars of 1,600 cc or less are subject to 15 % tax and over 1,600 cc and less than 2,000 cc are facing 30 % tax. Tax for locally manufactured cars over 2,000 cc is 30 %.

PHILIPPINES: Philippines introduced VAT in January 1988, standard rate was kept either 12% or 0%, some products were kept exempted from VAT such as the sale or import of agricultural or marine food products in their original state, livestock or poultry used as or for producing for human consumption etc.

MOROCCO: This country implemented the VAT from January 1986 where the standard rate of VAT is 20%, where some specific business activities where taxed at a lower rate of 7% which includes supply of water, electricity and pharmaceutical products and petroleum products, banking transactions, and hotels' and restaurants' operations at 10%.

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