18 month grace period when value added tax is implemented in the UAE, ministry says

The UAE’s finance ministry said there will be an 18 month grace period when a value added tax is imposed in the country. The move to introduce VAT as well as federal-wide corporate taxation comes as the government starts feeling the pinch from the decreasing price of oil.

“An immediate announcement will be made once a final agreement on imposing a VAT law is reached,” the ministry of finance said in a statement. “Concerned sectors and entities will have around 18 months after imposing the law to implement and fulfill the requirements of their tax obligations.”

The VAT, which would make goods and services more expensive, would be done in the framework of the GCC custom union, Younis Haji Al Khouri, the Finance Ministry undersecretary, told The National last month. He was not immediately available to comment on today’s statement.

The statement said however that the draft VAT is still pending due to the absence of a final agreement between GCC countries on the tax rate and items that would be exempt.

The Finance Ministry said that the draft law for a corporate tax is also still being drafted and that a grace period of no less than a year would be given for compliance once it is announced.

At the moment, each emirate in the UAE has its own tax regime for corporations, although by and large they are low or non-existent.

While economists say it is unlikely that the UAE will move this year to start corporate taxation, the moves highlight the concerns that low oil prices may be with us for a while.

Oil, revenue from which the UAE government relies on to fund more than 60 per cent of the federal budget, has lost more than half its value in the past 12 months.


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