A five per cent VAT will lead to fundamental change in the way businesses operate across around the region.
The adoption of value added tax by GCC countries in 2018 would enable the six countries to generate additional annual revenues of $25 billion, tax experts.
A five per cent VAT, which represents a major shift in tax policy that will impact all segments of the economy, will lead to a fundamental change in the way businesses operate across around the region.
In the UAE, VAT is expected to generate around Dh10 billion to Dh12 billion in additional revenues in the first year of implementation, or about 1.5-2 per cent of GDP. Companies that record annual revenues over Dh3.75 million will be obliged to register under the VAT system, while companies whose revenues range between Dh1.87 million and Dh3.75 million will have an option to either register under the system or not during the first phase of rolling out the system.
VAT will bring more people in the tax bracket in the UAE economy. It would increase tax to GDP Ratio and help the government in economic and structural reforms moving forward, experts said.
The additional $25 billion revenue will allow GCC governments to amend the tax policy and other fees and charges and increase infrastructure investments.
As businesses prepare to implement VAT across numerous sectors, they will need to invest in analyzing, redesigning, developing and implementing updated systems, processes, contracts and business arrangements to match the requirements of the new tax system.
All GCC countries are working towards VAT implementation by 1 January 2018 to avoid transaction and sales issues that could arise from intra-GCC trade.
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IMC Group