Complex Made Simple

UAE official says GCC countries in key agreements over value-added tax

Healthcare, education and social services to be excluded from the tax

A top UAE official says the countries in the Gulf Cooperation Council have agreed on the main aspects of introducing value-added tax (VAT) in the region.

Younis Haji Al Khoori, undersecretary at the UAE’s Ministry of Finance, says the GCC is planning to implement the tax in three years, but the countries have not worked out a final agreement yet.

Al Khoori said that, at a meeting held a few days ago, representatives from the Gulf states decided to exclude healthcare, education, social services and 94 food items from VAT, but they are yet to be of the same opinion on areas such as financial services.

Tax regime

The six countries in the council have stepped up efforts to increase their non-hydrocarbon revenues after their receipts were hit by the slump in crude oil prices.

The International Monetary Fund (IMF) and several analysts have asked the region’s states to diversify revenue sources by introducing VAT, as well as broadening corporate and excise taxes.

The UAE had announced that it would draft VAT laws in the third quarter of this year. But it had stated that the country will not implement the tax until it reaches a final agreement with other GCC countries on areas such as the tax rate and exemption, as it feared its competitiveness could be hurt and there might be a surge in smuggling across borders.

The IMF projects that the UAE could add revenues of 7.4 per cent of non-oil GDP by implementing a ten per cent corporate income tax (CIT), five per cent VAT and 15 per cent excise tax on vehicles.