6th November 2017
Value Added Tax (VAT) is set to make its debut in the six-nation GCC block on 1st January, 2018. GCC Countries are introducing VAT as it will provide their country with a new source of income which will contribute to the continued provision of high quality public services into the future. MSI's Chennai based accounting member DVS Advisors LLP provides further information.
VAT is basically an indirect tax. Occasionally you might also see it referred to as a type of general consumption tax. In a country which has a VAT, it is imposed on most supplies of goods and services that are bought and sold. Over 150 countries have implemented VAT (or its equivalent, Goods and Services Tax), including all 29 European Union (EU) members, Canada, New Zealand, Australia, Singapore and Malaysia to name few. VAT is charged at each step of the ‘supply chain’. Ultimate consumers generally bear the VAT cost while businesses collect and account for the tax, in a way acting as a tax collector on behalf of the Government.
GCC Countries are introducing VAT as it will provide their country with a new source of income which will contribute to the continued provision of high quality public services into the future. The United Arab Emirates (“UAE”) VAT law provides for a uniform VAT tax rate of 5%. This is in line with the tax rate adopted in the GCC VAT Treaty. The UAE will remain tax-free in many ways even after the implementation of VAT as there is no income tax on salaries in the country. Free zones in the country also offers tax free environment including 100 per cent foreign ownership in free zones, ease of doing business, etc. The Government is likely to use its ability to either zero-rate or exempt many supplies, to ensure that the impact of VAT is kept to a minimum. Electronics, smartphones, cars, jewellery, watches, restaurants and entertainment will fall under the taxed category. Some categories of supply which are exempt from tax are supply of specific financial services (to be explained in tax legislation), residential real estate, space/free space, local transportation of passengers etc.
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DVS Advisors LLP is a contemporary tax, legal and financial solutions provider with a specific focus on Direct, International and Indirect Taxation.
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