UAE has no plans to hike VAT rate
Saudi Arabia recently increased Value-added Tax (VAT) to 15% which is three times its initial rate of 5%, which will come into effect from July 1st. The Kingdom has also suspended the cost of living allowances as of 1st June as a measure to support the country’s economy and increase the revenues amid the COVID-19 the pandemic. An unprecedented Sharp Decline in oil prices and non-oil revenues caused the kingdom to make the surprising decision. This decision of Saudi Arabia will prompt a discussion in the UAE and other neighboring GCC countries to increase the VAT rate in their respective countries.
Differentiating Zero Rated & Exempt sales – UAE VAT
In UAE, VAT is applicable at the rate of 5% on supplies of goods and services (if eligible under standard supplies). It is important to understand that products and services offered by suppliers will be under the category of standard 5%, zero-rated and exempt supplies. Failing to understand these compliances might result in the non-filing or late filing of VAT return in UAE, thereby attracting penalties. There are two types of supplies under the provisions of VAT law in UAE, viz, taxable (5% & zero-rated) and non-taxable (exempt) supplies.