UAE Assures No VAT Increase Post Saudi’s Increment Announcement

After the surprising move of Kingdom of Saudi Arabia (KSA) of increasing the VAT by three fold i.e from 5% to 15%, the citizens of the UAE were anxious about what this means for the UAE VAT system and if it the UAE government may take a similar initiative.

However, the UAE’s Ministry of Finance (MOF) has tweeted that the UAE has no immediate plans to increase the VAT from its current rate of 5%. This comes as a relief to the UAE businesses and consumers alike, as a VAT hike at this stage could be counter-productive to the non-oil sectors in the UAE.

The UAE has no plans to increase its VAT (value-added tax) rate in the near future, according to under-secretary in the Finance Ministry, Younis Haji Al Khouri. KSA announced on 11th May,2020, that it would raise VAT to 15 per cent from 5 per cent from July 1, seeking to protect the economy hit by low oil prices and a fall in demand for its lifeline export worsened by the Covid-19 pandemic.

All the six nations of the Gulf Cooperation Council (GCC) jointly took a historic decision in 2016 of introducing a VAT system with a rate of 5 percent. The UAE and Saudi Arabia introduced the system in 2018 while Bahrain in 2019.

Last month the UAE’s Federal Tax Authority (FTA) said that it would provide relaxation in the due date for payment of VAT ending March 31 until May 28, as a step to support the economy amid the COVID-19 coronavirus pandemic.

This relaxation, along with the announcement of no VAT increase in the coming future, has reaffirmed the UAE’s bid to provide support to all sectors of the Economy and to help businesses and consumers during the COVID 19 pandemic.

This news blog post is written by CA. Taher Bohra. Feel free to call our tax advisor today for a all kind of UAE VAT and accounting related queries. Please send your queries to info[at]flyingcolour[dot]com or call +971 4 4542366.