The Gulf Cooperation Council has come to an agreement on certain issues for a new 5% VAT system in the region by the end of 2018, with certain sectors and vital products exempt from tax.
The six Gulf Cooperation Council (GCC) Member States of Saudi Arabia, Kuwait, The United Arab Emirates, Qatar, Bahrain and Oman have come to an agreement on certain issues for a new value added tax (VAT) system in the region.
Sourcing new revenue has been a priority in the region to offset the loss of customs revenues following the removal of internal customs duties, and as decreased oil prices negatively impact government income. The UAE is reportedly set to earn between Dh10 billion and Dh12 billion in the first year VAT revenues are applied, and along with Saudi Arabia and Oman, is most likely to be first with the roll out.
UAE Minister of State for Financial Affairs Obaid Humaid Al Tayer has said the introductory rate will be 5% however whether this will be the case remains to be seen. There will be certain exemptions; for example, healthcare, education and social services sectors, as well as 100 food items. The aim is to reduce socio-economic distortions but enhance economic stability.
With no exceptions planned, companies will be affected and will need to plan for a potential rise in the cost of doing business. Companies may be directly impacted through supplier prices rising due to the VAT implementation or indirectly; managing the more complex accounting practices and ensuring they are complying to the new rules and regulations. Training or hiring new employees may be necessary to deal with the changes.
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TMF Group's expert team of accountants in the UAE and Qatar are able to assist with bookkeeping, accounts receivable support, cash management and VAT implementation. Our team can help to make sure your company is ready for any future change in regulation.
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