Whilst businesses and regulators eagerly await the complete legislation that enacts (VAT) across the GCC, I would like to share my views on the different discussions I have come across.
What is Value Added Tax? VAT is a tax on the amount a good or service costs, which increases the cost at each stage of production or distribution.
Who is eligible to reclaim VAT? In most instances, businesses who are VAT registered and deal with businesses which are in turn VAT registered, may be able to reclaim most types of input VAT. Tourists who export goods can also reclaim VAT (usually after a processing fee). There are also other instances, where VAT can be reclaimed.
It does not seem like a tax on my profits? Simply put, this is not a tax on your profits. Currently, the UAE has no plans to tax profits.
Would Free Zones be subject to VAT? Dubai has pioneered the concept of Free Zones, by establishing JAFZA (Jebel Ali Free Zone Authority), back in 1985. All Free Zones, are expected to be exempt from VAT. This provides an exciting new opportunity, for businesses.
Are Free Zones a growing trend globally? Whilst Dubai seems to have a handle on the Free Zone concept, countries not only in the GCC but even further afield, such as the United Kingdom, are seriously considering at establishing Free Zones, to promote trade.
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