1st January 2018 will be a big day for all those living in the United Arab Emirates. That is the day when the UAE is set to introduce VAT. It seems hard to believe VAT is not currently in place in the country, especially since many other countries have paid the tax for years.
The decision is down to falling revenues from the oil industry. To maintain and increase the proceeds going to the government each year, it has been decided that VAT will be introduced in the country. One source estimates the new tax could generate around $25 billion every year.
The VAT rate on introduction of the tax will be 5% - far lower than the rates seen in other countries. Despite this, many of those who live and work in the region are far from happy about the change. This is perhaps not surprising, since they are not used to paying VAT on goods and services purchased. Similarly, businesses are not used to dealing with VAT records and payments, and must now accommodate the new rules, much as VAT-registered businesses in other countries must do.
The UAE has been in the minority on value-added tax up until now. By leaving that territory behind and introducing the tax, it will join more than 150 other countries worldwide that have had VAT in place for many years. It is now only around five months until the new laws are introduced, and yet many businesses in the region are still woefully underprepared for the tax.
The good news is there is plenty of support and advice online from accountants and similar professionals on how the introduction of VAT will affect those in the region. Similarly, there is a lot of information available for consumers in the region, since the new tax will likely affect most people, if not everyone, in one way or another. Luxury items will now have VAT added to them, so consumers should be ready for prices to rise on 1st January next year.
Some people appear unconcerned about the impact on their finances, while others are worried about the extra costs. Businesses will likely be affected more than anything else, since they will need to put more accounting procedures into place to ensure they are capturing all the relevant information. They must assess what should be paid to the government, just as VAT-registered people in other countries should.
It will be intriguing to see what happens on New Year’s Day in 2018, when the new tax rules become a reality. How many people will rein in their spending, and how many businesses will find they failed to prepare adequately? Preparation is key, as we shall see.