Why is VAT being introduced?
The Ministry of Finance and the wider GCC, have agreed to implement value added tax (VAT) at a rate of 5% from 1 January 2018. This landmark agreement marks the start of a fiscal reform across the region.
The increased need to diversify the economy, changing operating models and promoting smart initiatives led by technology and employment continue to be key trends. In order to promote such change and create a economy which is safeguarded for the future, governments across the region have introduced various initiatives to reduce the dependency on oil generated incomes and further stabilise the economy, one of which being the introduction of VAT.
VAT will aid in boosting government income, with the introduction set to generate Dh12 billion in its first year and Dh20bn in its second year within the UAE alone, according to the Minister of Economy. The international monetary fund (IMF) said introducing VAT at a low rate could generate between 1.5 to 2 per cent of GDP and aid in driving economic change.
As such fiscal reform aligns the region further, it will create the need to re-evaluate systems, processes, increase the need to upskill professionals and prepare for the change which such reform brings.
At Grant Thornton, we are working with a number of clients across the region to not only unlock their potential to grow, but to ensure they are effectively prepared and ready prior to the implementation date.
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