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| 04 February, 2018

VAT to help lift UAE industries

Nation has the lowest VAT rate globally

Image used for illustrative purpose.
VAT is being introduced into the United Arab Emirates and Saudi Arabia from January 1, 2018

Image used for illustrative purpose. VAT is being introduced into the United Arab Emirates and Saudi Arabia from January 1, 2018

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UAE - VAT won't have any negative impact on Expo 2020 plans and projects, stressing that these projects have opened up sustainable investment areas for the UAE in all investment and service sectors.

UAE businesses will be least affected by the imposition of value added tax (VAT) because it is one of the lowest rates in the world and the government will also be pumping back tax funds into the development projects which, in turn, will boost a number of industries in the country, says a new study.

Conducted by the Alliance Business Centers Network (ABCN), the study noted that the UAE has the lowest VAT rate at five per cent - along with Taiwan - in the Arab world, and globally too.

Singapore and Switzerland have levied VAT at seven per cent and eight per cent, respectively, while both Lebanon and Australia impose 10 per cent VAT.

Hungary, meanwhile, has the highest rate at 27 per cent followed by both Denmark and Sweden at 25 per cent and Italy at 21 per cent, respectively.

Among Arab countries, the study showed that Tunisia imposes the highest VAT at 18 per cent, Algeria at 17 per cent, Egypt at 14 per cent and Lebanon at 10 per cent.

Sherif Kamel, regional president for Russia, the Middle East and Africa at the ABCN, said VAT would ultimately support the development of large public projects that contribute to business growth and sustainability.

"The potential of business opportunities in the UAE is still high compared to regional countries, given the medium and long-term vision for development and the opening up of new investment fields, i.e. investments in artificial intelligence, ICT and other traditional investment sectors," the study said.

Adil Abbasi, manager of VAT advisory at Sajjad Haider and Associates, noted that the UAE is already a destination of choice for international businesses, owing to its robust infrastructure, investor friendly environment, enhanced security, quality standard of living and its unique position as a nexus for trade between the East and the West. Hence, it is not expected that VAT will have any significant impact on foreign direct investment.

He said improved record keeping across the value chain on account of the new VAT legislation will give businesses increased confidence when dealing with their stakeholders, both upstream and downstream; this is imperative for having stable business operations, both for existing companies as well as for those seeking to establish new ventures.

VAT impact on Expo 2020

The ABCN report ruled out the possibility of VAT having any negative impact on Expo 2020 plans and projects, stressing that these projects have opened up sustainable investment areas for the UAE in all investment and service sectors.

It emphasised that compared to the countries of the region, the UAE proved to be the best when it comes to trust in investments and the availability of comparative advantages that contribute to business growth, especially in terms of infrastructure, transparency, imposition of no income tax and tight investment-regulating legislation.

Data analysis by the ABCN pointed out that the federal and local budgets announced for 2018 prove that government spending on development is increasing, which encourages the business sectors to continue to grow through investment expansion, since the UAE offers a large number of incentives to encourage the growth and sustainability of business.


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