The modern variation of the VAT was first introduced by France in the 1950s. Maurice Lauré, Joint Director of the France Tax Authority implemented the VAT on 10 April 1954. VATs raise about a fifth of total tax revenues both worldwide and among the members of the Organisation for Economic Co-operation and Development (OECD). As of 2014, 160 of the world's approximately 193 countries employ a VAT, including all OECD members except the United States, which uses a sales tax system instead.
The UAE Minister of State for Financial Affairs, His Excellency Obaid Humaid Al Tayer, has stated that the UAE will implement VAT at the rate of 5% on 1 January 2018. Other GCC countries may do so at the same time or by 1 January 2019 at the latest.
VAT will provide our country with a new source of income which will contribute to the continued provision of high quality public services into the future. It will also help government move towards its vision of reducing dependence on oil and other hydrocarbons as a source of revenue. On 24th October 2016, the FTA (Federal tax Authority) was signed into law to govern federal taxes and align UAE laws to international standards.
VAT Registered business will be able to reduce their output tax liability by the amount of VAT that relates to bad debt which has been written off by the VAT registered business. (The legislation will include the conditions and limitations concerning the use of this relief).
Although VAT is a federal tax, taxpayers will be required to report sales and purchases on an Emirate level basis on their UAE VAT returns. This will represent an additional compliance burden to businesses operating across the Emirates.
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