Business owners and landlords must pay a five per cent value-added tax (VAT) starting January 2018, announced the Federal National Council (FNC) on Wednesday in the UAE capital.
The FNC approved the draft law, which serves as a legal framework and organizes all the regulations of taxes, which aims to generate revenue for the federal government and enabling a sustainable economic growth.
Private businesses making Dh370,000 and more a year will have to pay VAT. The tax is binding on landlords renting out properties as well, which could mean a rise in rents for tenants across the UAE.
There are currently more than 450,000 private owned companies in the UAE, and the number is expected to soon reach 600,000, which will see a growth in the annual GDP.
The law will be implemented in the UAE on January 1, 2018. However, all GCC members have until January 1, 2019 to implement the rule.
“VAT is the only law that is currently with the legislative committee, as well as the selective items tax on tobacco, fizzy drinks and energy drinks.”
The minister said the effect of the VAT on people in general, including residents and consumers, will start with 1.3 per cent and will drop with time, whereas businesses will face 0.06 per cent, and 0.04 on gross domestic product (GDP) growth when implemented.