The United Arab Emirates’ government is in the early stages of studying a corporate tax framework for the country, an official has said.
Minister of state for financial affairs Obaid Al Tayer told reporters of the plans on Saturday, according to Gulf News.
Responding to questions regarding taxation, he indicated there were no short-term plans to increase the country’s recently introduced value added tax rate of 5 per cent or a 100 per cent excise tax on tobacco products and energy drinks and 50 per cent on soft drinks.
“If you’re referring to the next five years, we don’t see anything [relating to] increasing the VAT rate or the excise rate. I also want to confirm that there aren’t any studies or any legislation regarding introducing income tax, Al Tayer was quoted as saying.
However, he said that the finance ministry was in the early stages of introducing a corporate tax.
“At the time being, we are not about to implement the corporate tax, but we are studying the possible tax framework. We are in the early stages of studying the [corporate] tax legislation,” he said.
Al Tayer’s comments follow a report released in January by ratings agency S&P in which it concluded that Gulf Cooperation Council countries were unlikely to introduce further taxes in the medium-term.
The company also stated that the implementation of a 15 per cent corporate tax, 15 per cent income tax and 5 per cent remittance tax would increase government revenues by only 3-4.5 per cent of GDP making them still largely dependent on hydrocarbons.
A more likely avenue for increasing revenues was deemed a higher value added tax rate based on estimations that the current collection efficiency ratio would make the 5 per cent tax rate effectively 2.5-3 per cent.
This could see policymakers discuss a 10 per cent VAT rate in the future, S&P said.