
UAE: Moving Towards Direct and Indirect Taxes
For a number of years, the UAE has made noise regarding the introduction of corporate tax and value added tax (VAT). At the end of August, the UAE’s Ministry of Finance released an official statement on progress made to date.
Regarding VAT, the MoF has been working with its GCC neighbors (namely Bahrain, Kuwait, Oman, Saudi Arabia and Qatar) to ensure that any introduction of a direct tax regime would be coordinated with other GCC countries. Given the desire to coordinate a joint VAT framework, negotiations are still underway on its final terms, although the UAE has committed to making an immediate announcement once it has been agreed. Even if the final agreement is released in the next few months, businesses will have approximately 18 months to prepare and implement the new regime. One can only speculate as to how long it will take for the GCC countries to reach an agreement. Some local commentators suggest it may not be before latter part of 2016.
With regards to the impending introduction of corporate tax, the situation remains that at the time of writing there is no draft law to review with MoF negotiations continuing. At the point the law is released, taxpayers will be provided with a preparation period of at least 12 months prior to implementation.
Despite a lack of timescales, the recent statement confirms that the UAE is committed to launching direct and indirect tax regimes and, given the crash in oil prices, it may be that developments accelerate with increased fervor.
For any company operating in the UAE, the introduction of direct and indirect taxes will have a big impact on the costs of doing business. For any company contemplating doing business in the UAE, the inevitable introduction of the taxes should be factored in your business plans and cost forecasts.