UAE Officials to Discuss Potential Tax Introduction
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Some of you may have read my article back in September 2015 (for those that didn’t, shame on you!) regarding the possibility of taxes being introduced in the UAE – https://www.yourpoadubai.com/will-taxes-be-introduced-in-dubai/. In this article, I outlined the ongoing debate regarding the potential introduction of either some sort of VAT or corporation tax in the GCC and the effects this may have on the region. It was suggested then by the Ministry of Finance that such tax proposals were to be concluded within the third quarter of 2015. It appears that this is still the aim as it has been reported in some of the major UAE newspapers this week that ministers are again meeting this month to re-address the issue.
Is Taxation Still A Serious Consideration?
Taxation is something that is certainly still in the minds of those who run this country. It has come from the top level down with Vice President and Prime Minister of the UAE and Ruler of Dubai, HH Sheikh Mohammed bin Rashid Al Maktoum, having announced the move with indications being the possible introduction of a 3-5 per cent VAT rate by 2018.Again the reasoning behind this does appear to be the falling oil prices that are continuing to have a huge impact on the country’s economy, with the Dubai property market being an example of this.Sheikh Mohammed has stated that government ministers and officials will “discuss UAE’s economy beyond oil” and he adds that “…our goal is to have a new equation for our economy where we neither depend on oil nor market fluctuations.”
Introduction of VAT
It appears that the introduction of tax is one of the paths that has been chosen. As anticipated, it does appear to be VAT or sales tax that is favoured rather than the more controversial corporate tax. It is common knowledge that many international businesses relocate to Dubai due to its tax-free status and much of this foreign investment is reliant upon this. Introducing corporate tax would have much deeper lying significances.
It could be argued that VAT tax would be an easier starting point for taxation in the UAE. The number of visitors coming to Dubai is increasing every year, with Dubai International Airport now being the busiest airport in the world. Dubai is recognised as the number one tourist hub and it is unlikely for this to change with the introduction of low level taxation. The level of taxation will still be lower than in most other countries worldwide. People will still come here and spend their money, whether as tourists or expatriates.
The Expo 2020 is expected to bring further volumes of people and indeed investment so perhaps this tax will help to fund the economy ahead of 2020 and devolve from the previous reliance on oil. 7days newspaper has reported that “the move is forecast to generate between Dhs10 billion and Dhs12 billion in revenue for the UAE alone and is seen as one potential source of post-oil revenue for governments.” (http://7days.ae/uae-ministers-plan-meeting-discuss-vat/79373
The effect this will have on the everyday people living in Dubai, on tourism, the property market or whatever area is relevant to you ultimately remains to be seen. One thing that is evident is that some sort of taxation is going to happen in the not too distant future. Watch this space…
[Nb – The author of the above article is an LLB Bachelor of Laws graduate from the UK and is the Managing Partner of Your POA – Dubai . Your POA specialise in representing national and international clients as Power of Attorney in Dubai for a wide range of property related matters; from Property Handovers & Title Deed Registrations to Sale, Purchases & Gift Transfers. If you need a Power of Attorney or have questions on any property related matters in Dubai, please email email@example.com or call Philip on +971 52 832 7420]