Massive 55% tax coming to the UAE
Good news for the UAE: No value-added tax (VAT) increases for upcoming 5 years.
UAE Minister of State for Financial Affairs Obaid Al Tayer said at the Arab Fiscal Forum the government has no plans to raise the rate of VAT or excise tax in the near future.
He was answering to a January note by S&P Global Ratings which believed some GCC countries may double the rate of VAT to 10% to raise government revenues, by between 1.7% to 2% of GDP.
Not so good news: The framework for corporate tax is under study, as per Al- Tayer.
Corporate tax is already applied on certain sectors but will now be expanded to include all UAE businesses.
We’ll get to that.
But what impact has the 5% VAT had or will have on the country?
No Impact: study
In a study, the Alliance Business Centers Network (ABCN) saidUAE businesses will be least affected by the imposition of VAT because it is one of the lowest rates in the world.
“Also the government will also be pumping back tax funds into the development projects which, in turn, will boost a number of industries in the country including investments in artificial intelligence, ICT and other traditional investment sectors,” says a new study.
Among Arab countries, the study showed that Tunisia imposes the highest VAT at 18%, Algeria 17%, Egypt 14% and Lebanon at 11%.
The ABCN report said Expo 2020 plans and projects will not be affected, evidenced by 2018 federal and local budgets showing government spending on development is increasing.
Some impact: JLL
Property consultancy Jones Lang Lassalle (JLL) said VAT in the UAE may impact parts of the real estate market in 2018, in particular the retail and office segments.
“Softer conditions and about 2% added to consumer prices will force landlords to take on additional costs, so if anything it’s going to be a negative, but not a big negative,” Craig Plumb, head of research at JLL Mena (Middle East and North Africa), told media last week.
While commercial buildings are subject to a 5% VAT, residential buildings are largely excluded.
Plumb said JLL witnessed an increase in real estate deal making in December 2017 before the tax came into effect.
“I think a lot of it was people bringing forward transactions to avoid the VAT, and January has been definitely a quieter month because of that,” he said.