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GCC set to impose 5% VAT in 2018

GCC set to impose 5% VAT in 2018

DOHA: spite administrative and technical obstacles, policymakers in the Gulf Cooperation Council (GCC) are all set to introduce a 5 percent value-added tax at the start of next year, a senior UAE official has said.

The tax, planned to be adopted in 2018, is aimed at increasing non-oil revenues, but economists and officials in some countries have said privately that simultaneous introduction in all countries may not be feasible, reported Reuters.

That is because of the complexity of creating the administrative infrastructure to collect the tax and the difficulty of training companies to comply with it, in a region where taxation is minimal, the report said.

However, Younis al-Khouri, under-secretary at the UAE finance ministry, reportedly said GCC governments were planning for early, simultaneous adoption.

“By 2018, January 1, we are aiming to adopt 5 percent VAT across the GCC,” he was quoted as saying in a joint interview with Reuters and fellow Thomson Reuters company Zawya. Other GCC members are Saudi Arabia, Kuwait, Qatar, Oman and Bahrain.

Asked whether some sectors in the UAE might be exempt from the tax to reduce the drag on the economy, Khouri reportedly said the government was aiming for a 5 percent rate across the board but parts of seven sectors – education, healthcare, renewable energy, water, space, transport and technology – might get special treatment.

“There might be areas … but currently, as the Ministry of Finance, we are not aiming towards exemptions, which could create some leakages, some confusion.” Khouri reportedly said the government expected around Dh12 billion of revenue from the tax in its first year.

That would be about 0.9 percent of the UAE’s gross domestic product of $371 billion in 2015, Reuters quoted official data.

From the start, authorities will seek to register all companies with annual revenues exceeding $100,000 for the tax, and anticipate 95 percent or more of companies will comply in the initial stage, said the news agency.

Revenues from the tax may increase gradually with economic growth but the government is not at present considering any increase of the tax above 5 percent, and would not raise it in the future without a thorough study of the economic and social impact, Khouri reportedly said.