Dubai Customs confirms VAT planning on track

Dubai Customs Executive Director Mr. Abdul Rahman Al Saleh told a seminar at the Arabian Travel Market in Dubai that his Department has been commissioned to study the VAT project and has been working over the past two years to develop a VAT system that could be applied across the Emirates and expects to have the infrastructure in place by the final quarter of 2008 for implementation. A team of specialized UAE nationals have been driving the project in consultation with international experts.

However, he stressed that the decision about when exactly VAT should be introduced in the UAE was one to be made by higher authorities.
The UAE has to phase out customs duties as part of the Free Trade Agreements it was signing with a number of its major trading partners and VAT is being considered to replace this lost revenue source for further investments in health, education and public infrastructural needs, which will benefit UAE nationals, expatriates and tourists. The International Monetary Fund (IMF) is backing the UAE on this initiative.

VAT is considered world wide to be one of the healthiest forms of taxation and has been adopted by most leading economies of the world. It is now in use in more than 140 nations, after being first introduced in France 52 years ago.
The current studies by Dubai Customs had been requested by the federal authorities of the UAE and the initiative is in line with the wise leadership of His Highness Sheikh Khalifa bin Zayed Al Nahyan, President of the country; and the vision of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President, Prime Minister and Ruler of Dubai. Their Highnesses, Rulers of the other Emirates are also fully committed to the project and other GCC states are also expected to adopt VAT after it has been successfully introduced into the UAE.

The seminar was told that VAT is expected to be a single rate between three and five per cent, with a high threshold set for registration to exempt small businesses.

As is common practice around the world, tourists would be also able to claim back the VAT they pay on purchases over a certain amount under the current proposals.