VAT in Dubai
What is the Value Added Tax (VAT)?
The VAT is an indirect tax which is imposed on most goods and services that are bought or sold in a particular nation. Necessary goods and services may or may not be excluded. The VAT in Dubai is a consumption tax, and it is the most commonly used tax globally. It is currently in use in over 150 nations globally. Because it is a consumption tax, it is imposed at every step of the supply chain. Its ultimate cost is borne by the end consumer with businesses recording, collecting, and remitting the tax revenues to the government.
What is the difference between a VAT and a sales tax?
Even though the sales tax is also a consumption tax, there are a few important differences between the two different types of taxes. One difference is that countries only impose a sales tax on the transactions involving goods. The end customer only pays tax on the final transaction of the goods.VAT in Dubai, on the other hand, is imposed on goods and services and is levied at every stage of the supply chain – hence its constant changes. Additionally, VAT is imposed on the final sale, and is levied on imported goods and services so as to ‘level the playing field.’ Most countries prefer to levy a VAT on goods and services because it is considered to be a more sophisticated tax since it converts businesses into tax collectors who work on behalf of the government.
Why is the UAE implementing VAT?
The UAE is implementing the VAT in Dubai to ensure that its national governments continue to have the public funds necessary to continue to provide its citizens with basic and necessary public services including schools, hospitals, public parks, waste control, and police services. The UAE also wants to use the funds from this tax to invest in industries other than oil to diversify its national economies.
Why does the UAE need to coordinate VAT in Dubai implementation with other GCC nations?
The UAE needs to do this because the nations in the region are considered to be part of the “Economic Agreement between the GCC states.” These nations have historically worked together in terms of designing and implementing public policies designed to produce collaborative approaches which are considered to be best for the region.
When will the VAT go into effect, and what will its rate be?
The VAT will be effective as of January 1, 2018, and its rate will be 5%, but this is subject to change at any time.