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VAT in United Arab Emirates 

His Excellency Obaid Humaid al Tayer announced in Dubai press conference that UAE will proceed to implement VAT (Value Added Tax) on January 1, 2018.

VAT rate initially expected to be as low as 5% and applied on basic food items, education and healthcare. Few exceptions will be granted to government and organisations as well as the refund will be available.

In support of small enterprises, MOF confirmed that not all business required registering for VAT in order to keep away from reporting and compliance as required by a system like VAT.

UAE Implementation of Value Added Tax (VAT) is a sign of maturing economy and sustainable growth. UAE government spends a lot from its budget on schools, roads, police services, waste control and parks. VAT imposition will supply a new source of revenue and also it will aid the government in its vision of less dependence on revenue from Oil export and other hydrocarbons.

To fully comply with VAT regulation, business needs to make changes in their main operations, financial management, bookkeeping and their Software as well as in HR i.e. tax consultant and accountants. MOF will help in providing education and guidance to comply with VAT regulation but will not support in a financial term for hiring tax advisor, accountant and for buying new technology. As individually, each business is accountable and fully responsible for complying with VAT laws.

As per my suggestion VAT will lead to increase in inflation rate as automobile and luxury market prices will be increase but this short term effect will cope up by the benefit which it bring to UAE economy in long term as less dependence on oil revenue will allow more sustain growth and can outlook the volatile oil market prices.

Moreover, on the one hand, VAT will increase prices and on the other hand VAT will lead to more responsible purchasing which give hype to competition in the market will ultimately decrease in prices as well as the inflation rate.