UAE: A new era of indirect taxation in UAE

After the introduction of Excise Tax from 1st October 2017 it was almost certain that the UAE government would introduce Value Added Tax (VAT) and as expected VAT has been introduced and implemented with effect from 1st January 2018 in the UAE. UAE is the second GCC country to implement VAT along with Saudi Arabia. 

Excise tax has been levied on three categories of goods which covers tobacco and tobacco products, energy drinks and carbonated drinks and there are only two applicable excise tax rates 100% and 50% on the taxable goods produced or imported into UAE. 

VAT has been imposed on most of the supplies of goods and services if the place of supply is UAE. The standard rate of VAT is 5% however some specific industries and transactions have been kept Out of scope, Zero rated or Exempt from VAT. 

Federal Tax Authority (FTA) under the umbrella of Ministry of Finance has articulated and laid down the well-defined provisions for different businesses and locations termed as free zones, mainland and designated zones. The law has recognized some free zones as designated zones and extended some special provisions for the businesses established in designated zones treating most of their transactions as out of scope. 

The implementation has been embraced by the business community comfortably within a short span of time with extra-ordinary support and guidance from the FTA. The Laws, rules and regulations have been structured, regulated and enacted like a matured economy and well accepted by the understandable business society.

Generation of Excise Tax and VAT revenue would add a new chapter in the revenue stream of UAE which would be utilized for the development of UAE and would be undoubtedly inculcated and contributed for the society and residents of UAE.

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