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VAT Revenue May Be Equally Split by UAE Gov’t, 7 Emirates

March 8, 2017 | Arabian Business

Revenue collected from value-added tax (VAT) is likely to be equally shared between the UAE federal government and each of the seven emirates, according to a new report.

The five percent VAT will come into effect across the Gulf countries from January 1, 2018.

In its 2017 Sharjah report, released on Tuesday, Oxford Business Group (OBG) quoted Mathias Angonin, sovereign risk group lead analyst, Moody’s Investors Service Middle East, as saying, “he understood an agreement had been reached under which taxes will be collected by the country’s emirates, which will keep half of the revenues while passing the other half on to the federal government.”

Moody’s declined to comment further on the statement when contacted by Arabian Business, which has approached the UAE Ministry of Finance for a comment.

The OBG report said the federal government expects VAT to bring in around $3.3 billion (AED12bn) across the country in the first year of implementation, rising to between $4.9bn (AED18bn) and $5.5bn (AED20bn) in 2019.

On Tuesday, Fitch-subsidiary BMI Consultancy said there is a possibility that the VAT law in each GCC country will differ slightly at the country level.

“This means the amount of revenue raised, details on product exemptions and the costs to growth will vary across the GCC. We expect the UAE will be the most affected by the introduction of VAT given its larger consumer base, as the country will raise 2.1 percent of GDP from the tax, compared to 1.1 percent in Qatar and 2.0 percent in Kuwait,” the consultancy added.