why VAT: In 1950’s VAT was introduced in France and it is practiced in more than 120 countries all over the world. VAT has become number of governments choice because it benefits both the business and consumer community alike. It is a source of generating revenue for the government and seen as effective tax for tax authorities.
As per the International Monetary Fund (IMF) estimation through the implementation of VAT GCC states can generate 1.5-2 % GDP, even though the VAT rates are low. Thus the IMF and World Bank and the Organization for Economic Co-operation and Development (OECD) are in the forefront to encourage and promote governments to implement VAT as it is bearable revenue.
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VAT implementation in UAE
For the GCC states oil and gas industry was the backbone of their economies. 75-90% of government revenues were generated from the oil industry. But the global economic crisis affected the oil prices and oil prices dropped. As the GCC governments have committed to huge projects, the dropping of oil price affected the budget of governments. To overcome the deficit gap in budget tax reforms are necessary in GCC states.
UAE is all set for VAT implementation starting next year, all businesses In the UAE will need to record their financial transactions and ensure that their financial records are accurate and up to date. Businesses that meet the minimum annual turnover requirement will be required to register for VAT. Businesses that do not think that they should be VAT registered should maintain their financial records in any event, in case It is need to establish whether they should be registered.
The cost of living is likely to increase slightly, but this will vary depending on the individual’s lifestyles and spending behavior. for more information please refer: VAT consultants in UAE | FAQ
(information used in this report are from official sources and gulfnews.com)