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VAT introduced in UAE and Saudi Arabia

Published on January 03, 2018
For the first time ever Saudi Arabia and the United Arab Emirates (UAE) introduced the VAT (Value Added Tax).
VAT introduced in UAE and Saudi Arabia
  • They are the first two countries amongst the Gulf countries to introduce VAT system.
  • The other four Gulf States who were also keen to introduce VAT are Bahrain, Kuwait, Oman and Qatar. But they have decided to delay it further till 2019.
  • 5% sales tax is being applied to the goods and services.
  • The estimated VAT income for UAE is around 12 billion dirhams.
  • The governments of these two states are expected to raise as much as $ 21 billion in 2018 which is equivalent to 2% of the GDP.
  • The UAE Finance Ministry has said that the VAT returns will be used to upgrade public services, boost economy of UAE and for infrastructure development.
  • VAT will apply to a range of items like food, clothing, electronics, gasoline, phone, water, electricity bills, hotel reservations etc.

IMF recommendations

  • The International Monetary Fund has recommended the oil-exporting Gulf countries to raise non-oil revenue by introducing taxes.
  • It has also recommended the countries to introduce or expand the taxes on business profits as well.
  • VAT will be a long-term tax reform to help the Gulf countries reduce their dependence on oil revenues. It will help them to diversify their revenues.
Which of the two Gulf countries become the first to introduce VAT?
a. Oman and Qatar
b. Saudi Arabia and the United Arab Emirates 
c. Qatar and Saudi Arabia
d. United Arab Emirates and Oman
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