UAE: VAT will remain key source of revenue; Dh95.4 billion collected since 2018

The tax, which is imposed at the rate of 5% on most goods and services sold locally, has impacted all aspects of private and business life in the Emirates

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A Staff Reporter

Published: Wed 8 Feb 2023, 5:52 PM

Value-added Tax (VAT) will continue to be the primary revenue-generating tax for the UAE for the next few years, according to a report published by WTS Dhruva Consultants on the occasion of the fifth anniversary of VAT.

Starting from January 2018, the UAE levied five per cent VAT on goods and services as part of a wider GCC framework. The total revenue distributed at the state level in the UAE for VAT has amounted to over Dh95.4 billion ($26 billion), since its implementation in 2018 till October 2021, according to media reports.

The likely implementation of e-invoicing and the increase in the VAT rate will further reinforce the need for businesses to ensure that their VAT affairs are in order, says WTS Dhruva report.

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The introduction of VAT five years ago was a revolutionary development for the UAE. The tax – which is imposed at the flat rate of 5% on most goods and services sold locally – has impacted all aspects of private and business life and has required a paradigm shift in the way businesses and government organisations conduct their activities.

“Now that we have passed the five-year mark since the introduction of VAT, it is fair to conclude that the tax has been a success and a true testament to the UAE’s ability to adapt to the new economic realities,” said Nimish Goel, Partner at WTS Dhruva Consultants.

The report, firstly, looks back at the background surrounding the introduction of VAT, including the socio-economic context, policy choices, and strategic activities which had to be conducted to enable the successful introduction of the tax.

Since the tax regime is not stagnant, the report continues by discussing the legislative and procedural developments concerning VAT over the past five years – importantly, this includes the recent changes to the penalties, voluntary disclosures, and the statute of limitation provisions, which now make it financially more attractive for businesses to disclose errors voluntarily, rather than have them discovered by the FTA during a tax audit.

To provide practical insights to the business community, the report provides an overview of ongoing challenges faced by businesses in 13 different sectors (real estate, retail, logistics, and so forth).

-waheedabbas@khaleejtimes.com

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A Staff Reporter

Published: Wed 8 Feb 2023, 5:52 PM

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