Value Added Tax in GCC likely to be set at Dh3.5mn

The exact level of levying VAT will be ultimately determined by GCC Heads of State

The threshold of paying Value Added Tax (VAT) is likely to be set at Dh 3.5 million that might be made uniform throughout the GCC. The exact level of levying VAT will be ultimately determined by GCC Heads of State after consultation and an assessment of the impact on economies.

A Dh 3.5 million compulsory threshold would mean the exclusion of 70 per cent of schools, but only of 15 per cent of the turnover and for the healthcare sector the exclusion of 82 per cent of clinics and hospitals, but only 20 per cent of turnover. The conference organised by Dubai Economic Council discussed whether education or health should be subject to VAT and examined two alternatives. The first alternative included the provider fully in the VAT system where entities charge VAT on all supplies and can claim back VAT paid on their inputs. 

The second alternative specified sector supplies are "input-taxed/exempt" from VAT and assumed no charging of VAT and no right to claim back VAT on inputs. The UAE is considering VAT to compensate for the lost revenues from customs duties resulting from the free trade agreements (FTA) the UAE is negotiating with other countries. This is estimated at 80 per cent post FTA.