The Gulf States have remained a tax-free zone for a very long time. Recently, some developments have been made to impose affordable VAT services on all the businesses. With this new policy underway, there is a chance that the living costs in UAE may rise. However, the policy makers have decided to put the burden mostly on those who can afford paying VAT in UAE since they’ve been living lavishly till now. Let’s understand first that what exactly is VAT and why countries adopt this specific taxation policy?
Facts about Affordable VAT Services in UAE
The Value Added Tax, is one of the most prominent taxation policy which aims to bring into radar, such businesses and individuals who earn big bucks. It’s an admitted fact that UAE is full of outrageously rich individuals having businesses across the globe. Paying a meager 5% to 10% per annum on their yearly returns is not going to do any harm. On the contrary, it will provide for those who are living below the line of poverty. The question still remains as why bring the VAT in UAE? Let’s find out:
- Initially, the tax percentage has been set at 5% per annum. This percentage is believed to boost the UAE’s economy by adding in around 12 billion dirhams. Which is indeed a game changing amount.
- The companies having revenues more than 3.75 billion dirhams are to be registered in the first phase. Slowly and gradually it will be made compulsory for all the companies to register themselves for VAT.
- It’s important for you people to know here that on what items you’ll be paying 5% VAT. It is applicable on necessities like clothes, food, beverages, hotel rents, fuel and cosmetic products. There are other commodities as well but those are related to business organizations.
- Exemption from VAT has been given to categories like medical fee, tuition fee, airline tickets and public transport. This is a great step to balance the tax equation in which rich people are subjected to provide food and shelter for the needy.
- The free zone organizations which buy raw material or hire services for their businesses which do not come under the jurisdiction of free zones have also been made to pay the VAT.
- These affordable VAT services intend to the boost the UAE’s economy and will further strengthen their reserves. There are several projects which only aim to facilitate the poor and needy and VAT will help their government to complete the projects in timely fashion.
Since UAE had no concept of taxation before implementation of VAT, there’s been a mixed approach towards accepting it. Research has made it clear to the government that they can’t rely on petro-dollars to fulfill the needs of every country in UAE. VAT in UAE is the only alternative using which they can keep their revenue stream running without any fear of being dried out.