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DUBAI – With neighbouring Saudi Arabia planning on implementing new legislation that would triple its Value Added Tax (VAT) in July, what is in the cards for the UAE?
Saudi Arabia’s plan to hike its VAT comes as the coronavirus pandemic and the plunging of oil prices affected the economy significantly.
Saudi Arabia’s Finance Minister announced that the country will increase its VAT rate to 15 percent from 5 percent on July 1. In addition to the VAT rate increase, the allowance for cost of living for state workers is going to be suspended on the same date as the increase in VAT.
A number of countries across the globe are taking measures against the challenges caused by the outbreak of coronavirus. There are a number of countries that introduced economic packages to tackle the various economic challenges they are currently experiencing; while others announced extra austerity measures for the economic recession. They also implemented new duties and taxes.
It appears that the entire globe is witnessing several announcements for new measures on internal fiscal policies, enforcement of brand new taxation, and increase in taxation rates.
As for the UAE, the government said there are no plans to increase the current VAT rate even amidst the coronavirus pandemic, which is tipping the global economy into a full blown recession, according to the finance ministry.
This announcement came out after Saudi Arabia said it is tripling its VAT rate in order to shore up finances.
The UAE Ministry of Finance denied there is any plan on raising UAE’s value added tax rate, and confirmed that it is committed in achieving the developmental goals of the country.
The UAE is the second-largest economy within the GCC and was among the first regions that launched billions of dollars in monetary and fiscal support, including a Dh256-billion package for financial institutions which offers funding with zero interest. Banks also free up capital in boosting lending growth within the country.
The UAE introduced VAT on January 1, 2018 together with other GCC states that were eager in diversifying their economies and reducing their dependency on oil for income.
In an announcement, the Ministry of Finance Undersecretary, Younis Al Khoori, said that the ministry is going to reorient financial resources in order to have ample preparations not only for the future, but for continued growth which will ensure the safety and security of local communities.
The ministry is currently reviewing financial systems in place in order to make sure that they are ready in managing the next phases and capable of supporting UAE’s vital sectors.
According to the Undersecretary, they are devising different projects and programs which will enhance the ability of the country in continually developing processes and putting people as the top priority.
Al Khoory said this is necessary in building a secure future, as well as in achieving the society’s stability and wellbeing. UAE has been known to retain precautionary measures and launching of financial incentives thatsupport various industries in the country and protect the local economy.
Apart from not increasing the VAT rate in UAE, the Ministry of Finance also announced a directive that extended the payment of tax due for tax period which ended last May 31.
The extension for payments of VAT enables VAT-registered businesses in the country to meet their obligations without having to face any difficulties with the country’s current circumstances. Click here for more information about this topic. SC/Expat Media
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