In the UAE, VAT is all set to be executed from 07:00AM on 1st January 2018. The GCC (Gulf Co-operation Council) countries have agreed ‘in principle’ to the GCC VAT Agreement to apply VAT in the region at a standard rate of five percent. In the GCC, the Saudi Arabia and the UAE will be the first two countries to launch VAT from January 1, while other GCC countries will follow the same in the coming years.VAT shall be applicable on almost all the daily basic consumable goods and services that the inhabitants consume on a daily basis. VAT is one of the most common type of indirect tax which has been adopted by more than 150 countries around the world.
VAT is categorized as
1. Standard Rate: Standard Rate is a supply on which tax is charged at 5% and for which the related input tax is deductible. All supplies other than the goods/services which are not mentioned below in Exempted & Zero Rated are Taxable at a Standard Rate.
2. Exempted:: An exempt supply is a supply on which tax is not charged and for which the related input tax is not deductible.
What sectors will be Exempted?
1.Local passenger transport
3.Certain financial services
4.Supply of Residential buildings
3. Zero Rated: A zero-rated supply is a taxable supply on which tax is charged at 0% and for which the related input tax is deductible.
What sectors will be Zero Rated?
2.International Transport of passengers and goods
3.Investment in gold, silver, and platinum
4.Residential Buildings (First sale or lease within 3 years)
5.Certain Education Services
7.Medicines & Medical Equipment
8.Crude Oil & Natural Gas