It’s time to get ready for the 5% Value Added Tax (VAT) across the UAE from January 1, 2018, which will have long-term implications on the retail sector. Saudi Arabia too is expected to implement VAT beginning January 2018, while the remaining four GCC states Bahrain, Kuwait, Qatar and Oman may follow suit in stages to meet the 2019 deadline.
VAT is a consumption levy imposed on goods and services and is near universal across the world. The decision to introduce it in the GCC states comes from the need to diversify the regional economy and boost revenue generation and, in particular, to reduce dependence on oil revenues. The change has far-reaching implications both for businesses in the region and for the service providers and accounting and financial professionals.
“The tax procedures law is in the final phase, and will soon be issued and published. The technical legislative committee is debating the law in preparation for submitting it to the Cabinet for approval, while the selective draft tax law will soon come up for discussion by the committee,” Shaikh Hamdan Bin Rashid Al Maktoum, deputy ruler of Dubai and minister of finance, announced last month.
On the surface, VAT appears to be a complex topic, and the finer details of the law are worked out as the countdown to January 2018 begins, but the framework is reasonably clear. The tax will apply to almost all goods and services, except basic food items, education and healthcare.
Freehold residential properties sale or lease during the first three years is also exempted. It is compulsory for all businesses with an annual income of AED375,000 to register with the VAT system. Deadline for registering with the VAT system will start in the third quarter of 2017 but will be compulsory in the fourth quarter. Businesses with an annual income of AED187,500 and above have the option to register with the system. Look out for our forthcoming issues for the latest updates on the subject.
RetailME June editorial by Lawrence Pinto