Value Added Tax (or VAT) is an indirect tax. The UAE Minister of State for Financial Affairs, His Excellency Obaid Humaid Al Tayer in a joint press conference with Managing Director of IMF, International Monetary Fund, Mrs. Christine Lagarde announced that VAT will be introduced and implemented with effect from 1st January 2018 in UAE. The UAE Government also established The Federal Tax Authority (FTA) will be responsible for monitoring, regulating and maintaining records and data on taxpayers. It will also issue necessary guidelines and clarifications to taxpayers on matters related to federal taxes and related fines.
The FTA whose headquarters shall be in Abu Dhabi will be responsible for the collection and management of federal taxes. It will issue guidelines and directives to taxpayers on matters relating to the anticipated VAT and other taxes that may be imposed in the future. It has been assigned many related functions to Tax as fully provided in Article 4 of the Decree and combating Tax Evasion and Tax Avoidance, the FTA shall have the power to request access to any data and any third party available information relating to a person who is subject to tax audits.
VAT is one of the most common types of consumption tax found around the world. Over 150 countries have implemented VAT (or its equivalent, Goods and Services Tax), including all 29 European Union (EU) members, Canada, New Zealand, Australia, Singapore and Malaysia. Recently Indian Subcontinent enacted law Goods and Services Tax (GST).
VAT is charged at each step of the ‘supply chain’. Ultimate consumers generally bear the VAT cost while Businesses collect and account for the tax, in a way acting as a tax collector on behalf of the government.