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All six GCC states to implement VAT together, says UAE council official

The six members of the Gulf Cooperation Council (GCC) will all simultaneously introduce a law to implement value-added tax (VAT) in 2018, even if it means a slight delay due to some countries lagging behind in their preparations, an official in the United Arab Emirates (UAE) said.

Younis Al Khouri, under-secretary at the UAE’s finance ministry, told Zawya in an interview last month that a 5 percent VAT is expected to be implemented simultaneously across the GCC from January 1, 2018, as part of fiscal reforms following the plunge in oil prices.

However, tax experts have voiced concerns on the feasibility and likelihood of a totally simultaneous adoption, with some suggesting that the UAE might go ahead with implementation ahead of other Gulf Arab states.

Salem Abdulla Al Shamsi, a member of the UAE’s Federal National Council, told that no member of the regional trade bloc would move forward with the implementation of the tax system independently, even if it meant passing the January 1, 2018 target date.

“There will not be a country in the GCC that will do it standalone,” he said. “When they do it, everybody has to do it, as per the agreement before the GCC. They should sign together and start the VAT (implementation).”

The UAE’s Federal National Council (FNC) approved a draft federal law regarding the introduction of taxation procedures at a meeting on March 15 – a move that indicates that the state is in advanced stages of preparations to put a taxation system in place.

Obaid Humaid Al Tayer, UAE Minister of State for Financial Affairs, told the FNC meeting that the VAT framework agreement would be implemented across the GCC in a timeframe between January 1, 2018, to January 1, 2019, according to the official transcript of the council’s meeting.

Al Shamsi said that all six states were working very hard to meet the deadline. “In my personal view, if it (the implementation) does not take place on January 1, 2018, it will still go within 2018, but (with) all the countries entitled to start the VAT,” Shamsi said.

“The minister (Al Tayer) clearly mentioned yesterday (at the FNC meeting on March 15) that we will work along with all the partners and neighbour GCC countries to release it together,” he added.

Framework and procedures

During the meeting, the council said the tax procedures bill would provide a legislative framework and standardised procedures for any future tax laws, according to a transcript of the council’s meeting on its website.

“It is only the structure for the taxes – not just VAT, (but) for every other tax,” Shamsi said.

“Like it can apply to individual taxes, VAT, company taxes, real estate taxes – but we don’t have any (of those) yet the structure can easily make sure that if we launch any tax it will be within the guidelines.”

The tax procedures draft law included clauses laying out processes for the submission and collection of taxes, according to the transcript.

As per the draft law, each taxpayer would have to provide a tax statement and supporting documents in Arabic, the transcript stated.

The draft also outlined violations and penalties for tax evasion. It said penalties would apply to taxpayers who had intentionally refrained from paying taxes or those who provided false or incorrect documents.

Tax violators or evaders will be subject to either imprisonment or a fine that would not exceed five times the tax amount that was evaded, or both.

A director general and tax auditors will be appointed to enforce the tax law by a decree from the Minister of Justice, the transcript stated.

The UAE is expected to earn around 12 billion dirhams ($3.3 billion) of revenue from VAT in its first year.