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UAE to Implement 5% VAT from January 2018

24/2/2016

The UAE will implement value added tax (VAT) at the rate of five per cent from January 1, 2018.

The UAE will implement value added tax (VAT) at the rate of five per cent from January 1, 2018, said UAE Minister of State for Financial Affairs – Obaid Humaid Al Tayer to reporters after a joint press conference on Wednesday with Christine Lagarde, Managing Director of the International Monetary Fund (IMF), in Dubai.

The UAE will impose five per cent VAT while exempting 100 food items, healthcare and education. In the first year, the country is expected to generate Dh12 billion from tax revenue.

GCC countries have recently agreed that they will introduce VAT at a rate of five per cent in 2018. The framework agreement on the implementation of VAT across the GCC is expected in June this year. And have also decided to implement taxation as part of governments’ efforts to diversify revenues in the context of sharp decline in oil prices.

The IMF has been recommending fiscal consolidation in the GCC through diversification of government revenues and reduction of subsidies. They have also official said that indirect taxation in the form of VAT in low single digits is the most viable option for GCC states in the first stage of taxation as implementation of direct taxes require a fairly well-developed institutional framework.

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