VAT to generate $3.26bn for UAE in first year

The UAE is expecting to generate Dhs12bn ($3.26bn) from value added tax (VAT) during its first year of implementation in 2018, the country’s minister of state for financial affairs has said.

Speaking to the Federal National Council yesterday, Obaid Humaid Al Tayer explained that revenues from VAT would increase to Dhs20bn ($5.44bn) in the second year, according to Gulf News.

The country will implement a 5 per cent VAT rate form January 1 2018 with revenues to be share by federal budget and local governments, he said, but the current allocation has not been decided.

The government has already said 100 food items will be exempt from the tax alongside health, education and social services.

Officials have revealed that under phase one, only companies which record annual revenues of more than Dhs3.75m will be obliged to register under the system and will be taxed accordingly.

Companies that make annual revenues of between Dhs1.87m and Dhs3.75m will be given the option to either register under the first phase or wait until phase two.

Read: VAT in the UAE: Who will feel the biggest pinch?

The VAT is being introduced alongside the other Gulf Cooperation Council countries as a means of boosting government coffers during the current period of low oil prices.

The IMF said in February that Middle east and North Africa oil exporters had lost more than $340bn in oil revenues from their 2015 budgets.

Read: VAT to generate $25bn in annual revenues for GCC countries

During the session a draft law to approve the federal budget, with estimated expenditure for the year at Dhs48.7bn ($13.25bn) and revenue of Dhs47.696bn ($12.98bn) was also passed.

Read: Preparation is key as VAT looms in the GCC