Gulf States Will See 5% VAT by 2019

February 25, 2016 Taxation in UAE

No taxes for business in the UAEDUBAI – The countries of the Gulf Cooperation council have agreed to take the landmark step of introducing a cross-border VAT in order to gather non-oil revenues.

By the start of January 2019 all the countries of the Gulf Cooperation Council will see the implementation of a Value Added Tax, according to a statement made on February 24th in Dubai by the UAE Minister of State for Financial Affairs Obaid Humaid Al Tayer.

The new VAT will be implemented and enforced equally across the UAE, Bahrain, Kuwait, Oman, Qatar, and Saudi Arabia.
The new tax will be set at a rate of 5 percent, and will be levied on the sale of all products in the countries, with the only exemptions being healthcare, education, bicycles, and 100 basic food items.

The tax is expected to lead to the collection of an extra AED 12 billion in tax revenues in its first year alone.

The VAT is slated to come into effect on January 1st 2018, but each participating country has up to one year extra time in which to begin enforcing the tax, a measure which should provide extra time for each government to establish the necessary framework and processes to enforce the tax.

The possibility of a VAT in the Gulf states has been under discussion recently as a means to broaden governments’ tax bases in the face of falling prices of oil around the world.

Photo by Danny McL