VAT Implementation in the UAE

VAT Implementation in the UAE

Jan 24 2018, 8:15 AM by NationalBonds

Tying with the Royal vision of HH Sheikh Khalifa to diversify the economy, The UAE will start the Value Added Tax (VAT) application in January 2018.

The 5% VAT increase will apply to various sectors such as retail, health, utilities, and education.

While there are a number of factors to be considered in The UAE market, it is imperative to identify a clear VAT strategy for all sectors and undertake awareness trainings. Companies are encouraged to establish clear regulations for a smooth application in a successful and transparent business environment.

At National Bonds, we know that consumer behavior towards spending will change and we will guide our clients to plan strategically and develop an educated understanding of VAT and its effects on long-term saving plans. 

While the cost of living is expected to rise, the impact of VAT will totally depend on how a person lives and the trend of the lifestyle.

The habits of consumers will eventually change and key factors will include the VAT influence on changes in consumers’ lifestyle and purchasing power. The annual income has also a significant influence on the buying behavior of a person.     

To many consumers, VAT is commonly known as tax on consumption that is immediately paid on purchase of goods. While some may regard this step as an expensive addition to spending, the VAT implementation will indirectly contribute to improving the quality of many services in The UAE. Worldwide, it is known that VAT application on consumer goods helps the public control their spending and learn how to save.

In The UAE, the application of the VAT system is seen by many VAT scholars as a strong backbone to the tax structure in the country and an effective drive to steer away from the reliance on the oil income.

On a positive note, VAT is expected to open the door for many employment opportunities since SME and large companies will require a VAT expert on board to steer the business strategy in compliance with the rules of the government. As a result of this, the demand for VAT specialists has seen a rise and accounting firms are heading toward filling the knowledge gap in the market.

With the application of the VAT system, The UAE will remain strong in respect of number of payments at four according to international reports.

Due to its advanced technology and innovation, The UAE is also expected to have a smooth transition into the VAT system and its application. VAT will streamline an additional source of revenue to the Government. This is an efficient, revenue-neutral, and growth-maximizing solution to the stability of the economy in The UAE.

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