Dubai Customs illustrates the main aspects of VAT

• The date for the switch to VAT from the Customs Duty is to be determined by the federal government

In this briefing, held at the Raffles Hotel, Dubai and attended by a large number of local, regional and international media representatives, Ahmad Butti Ahmad, Director General of Dubai Customs confirmed that draft laws have already been submitted for approval to the UAE's federal authorities and are awaiting approval.

He also announced that the report on the level of Value Added Tax to be used in the UAE recommended a 3% threshold, and that the final decision is to be taken by UAE's federal authorities.

Butti said that all rumors about the switching date are not more than speculations, and that UAE's federal authorities have not determined a certain date yet. Butti believes that this date would be perfectly timed and aligned with UAE's comprehensive economic strategy.

"The revenues of the new VAT system would match the customs duties which would be canceled when the new system is implemented. Therefore, the new VAT system would not have any negative effect on the inflation rates in UAE." Butti said.

Answering a question about the implementation of VAT in other GCC countries, Butti said that this implementation depends on their readiness. However, he believes that all GCC countries would implement the VAT system eventually. Butti also confirmed the readiness of Dubai Customs to implement this system as soon as it's approved, because Dubai has already initiated a proper methodology in 2006 to implement VAT.

"VAT system is the best taxation system in the world, and by being highly transparent and accurate, this system would bring a lot of benefits to the UAE. This system would not have any negative effect on foreign investments because foreigners are used to such taxation systems and they prefer to operate under the umbrella of this system instead of being subject to unclear taxes." Butti added.

Butti said that VAT is already in use in 145 countries around the world and that over the past years it was proven that VAT is the most transparent and fair system in the world.

Butti referred to Mohsen Khan's, IMF Regional Director in the Middle East, remarks in a press conference that was held lately. Khan said that VAT is crucial for diversifying the UAE's economy into new sectors such as: Hospitality, Tourism, Financial services and transportation.

Khan was urging UAE to be the first GCC country to implement the VAT system, because Dubai has reached major milestones in preparing the platform for the new system.