How the VAT System Worked in the UAE in 2018 |

VAT In 2018: This Is How The Tax System Did In The UAE

It’s been a year since its implementation in the UAE

Posted on

7 January 2019

Last updated on 7 January 2019

Residents in 2017 welcomed the New Year with a surprise

It was two years ago this month that residents in the UAE received the news of the introduction of the Value Added Tax in the UAE in 2018.

And as the clock turned 12 and 2018 began in the country, so did the 5% taxing system on all goods and services deemed applicable.

The addition to the VAT in the UAE changed the way businesses operated and consumers behaved in the country – with many being more cautious towards their spending.

Then in April of 2018, the UAE government announced that tourists will be able to claim their VAT on goods purchased in the country while travelling back.

According to Federal Decree-Law No. (8) of 2017 on VAT, as well as the conditions, constraints and procedures outlined in the Law's Executive Regulations, any tax incurred on a supply or import made by a non-taxable person conducting business but not residing in the UAE (or any other country implementing VAT) shall be refunded to the said person.

SEE ALSO: This Is How Much VAT Is Refunded By Tourists Every Day In The UAE

So with the UAE no longer a VAT-free country, how has the taxing system done in a year’s time as we welcome a new year of VAT in the country.

Since January 1, 2018 there have been at least 296,000 companies that have registered for VAT in 2018 and tax returns have exceeded 650,000.

Despite facing some challenges when implementing the VAT at first, it seems like its smooth sailing from here on out.

UAE residents, however, were unsure how the taxing system was going to affect them at first, which resulted in 306,500 phone calls to authorities regarding the VAT during the first few months in the UAE.

And 147,000 questions and inquiries were responded to by authorities via e-mail and online – making the total number of queries about the VAT exceeding 453,500 questions.

Other Gulf countries following suit

The UAE may have been the first country in the Gulf to implement the tax system to its residents but other countries have started to follow the action.

For residents and expats in the Sultanate of Oman, a tax might be added in 2019.

Called the “sin tax,” this new taxation form was proposed by the State Council and the Shura Council on Tuesday.

SEE ALSO: Oman Might Be Getting A “Sin Tax” Very Soon

Adding at the very least close to OMR100 million to the revenue of Oman’s economy from the “sin tax,” the Economic and Financial Committee stated.

A “sin tax,” is a taxation payment that will be added on all and any product that is deemed “unhealthy.”

Bahrain’s parliament also made a decision to implement VAT at the start of January 1, 2019.

This newly added VAT into the country is aimed to support businesses in Bahrain and make companies ready to implement this.

SEE ALSO: Bahrain To Implement VAT At The Start Of 2019

Also, the VAT aims to change Bahrain’s economic system and avoid any public finance issues – like the drop in oil prices, which caused the Bahraini dinar to drop in value.

Businesses and companies have been advised to start preparing and analyzing the implications of the new tax law because the lack of preparations can have severe penalties and disruption in business.