VAT in UAE - A Brief Study on Tax Rates in UAE

VAT in UAE - A Brief Study on Tax Rates in UAE : As per UAE Minister of State for Financial Affairs, 5% value added tax in UAE from January 2018,which initiates the Value Added System in in all 7 emirs of United Arab Emirates (Abu Dhabi, Ajman, Fujairah, Sharjah, Dubai, Ras al-Khaimah and Umm al-Qaiwain).The introduction of VAT continues to be delayed because of the lack of unanimity amongst all the UAE State Governments. However, VAT is a process driven by State Government have to be prepared for VAT in UAE 2018.

Its the fact that,it doesn't go down general elections due take place in UAE in the certain months, one will have to wait for the new Government to take shape to take a view on this scheme at all Emirs of UAE.Once the framework agreement on implementation of VAT is reached, GCC countries have time from January 1, 2018 to January 1, 2019 to implement VAT,” said Al Tayer. CSR on the Other Hand has already introduced to over .4 million private companies out there at UAE for its Registration. In fact, What will be the Changes of UAE after getting done with CSR and VAT Implementation

      Tax rate to all can be referred using the below given table.
Corporate tax (expect in all oil and gas companies and subsidiaries of foreign banks)
0%. There are no taxes levied by the Federal Government on income or wealth of companies and individuals.
Tax applicable for all companies: the duty deducted by the municipality in each Emirate at the time of issuance or renewal of a trade licence.
10% of the annual amount of the rent of offices and warehouses and 5% of the annual amount paid by a company to accommodate its employees.
The Abu Dhabi Income Tax Decree of 1965, the Dubai Income Ordinance of 1969 and the Dubai Income Tax Decree, as well as the Sharjah Income Tax Decree 1968 dictate that:
Every corporate body that conducts trade or business through a permanent establishment situated in the Emirate is subject to tax at a sliding scale (in general this only applies to oil, gas and petrochemical companies and branch offices of foreign banks) -
Income less than AED1,000,000
AED 1,000,000 <= Income <= AED 2,000,000
AED 2,000,000 <= Income <= AED 3,000,000
AED 3,000,000 <= Income <= AED 4,000,000
AED 4,000,000 <= Income <= AED 5,000,000
40 %
Income >= AED 5,000,000
Custom duties on CIF (cost, insurance, freight) value of goods imported (Sharjah)


Basically a lot of groundwork have to be done before introducing the latest VAT System. Apparently,the private sector will need time to prepare for meet specified standards with tax rules.As an estimated AED12 billion will be bring to being by the VAT in the first year in the UAE.

Last September 2016, finance ministers of the Gulf countries met on VAT terms specified in GCC and had approved the introduction of the tax in uae.

The IMF is only one among other international bodies that have been advising the UAE and the rest of the GCC countries to introduce taxation among several options for the government to strengthen their revenue base in order to minimise dependence on the fluctuating global oil price.

Tax Rate in UAE 2018
Conclusion : 

  • Date of Implementation of VAT in UAE 2018: January 1
  • VAT rate: 5% and Other details enlisted in above table.
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  • What are exempted: In GGC the exempted are 100 types of staple food, and other essential service sectors such as healthcare and education.
  • What are not: In GCC Electronics, smart phones, cars, jewellery and watches, eating out and entertainments
  • Inflation fears: Central banks attempt to limit inflation, and avoid deflation,moreover,It will have negligible impact on residents with less especially for food and for luxury goods, services and lifestyles. Note that,It will not stoke inflation for the common man(ref : table above) as vital household expenditure items are exempted from its ambit
  • Common man: At the same time,the impact of tax on property transactions will be restricted in size to the wealthy(ref : table ) or those above upper middle income group, such as well might happen or be true and hike in the cost of financial services will hit the soul man. VAT System in 2018 will also have an effect on the buying power of tourists as they will have to(ref : table ) pay duty tax again on certain goods in their country of origin
  • Dh12 billion is the estimated revenue to be generated by the UAE through VAT in the first year


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