As we all know, the United Arab Emirates has been heavily relying on oil reserves forever to manage their finances. With the oil reserves drying out, the UAE government turned their eyes to tourism industry but despite all the glitter and glam, the sector is not yet strong enough to take the burden of the whole economy. In a bid to find alternatives to the current revenue generation streams, the authorities decided to introduce Value Added Tax (VAT) from January 1, 2018 at 7:30 a.m. The companies operating in the UAE have been busy off-late with their tax consultants UAE to find ways to deal with the VAT imposition.
As the dust is settling down, things are getting clearer about the imposition of the taxation. Dubai has emerged as one of the most thriving real estate market in the past decade or so and the government has put the VAT at 5 percent on this sector as well. Different countries charge VAT at different rates across the globe. For example, Yemen charges VAT at 2 percent, North Korea at 2-4 percent, while there are many other countries which charge around 20 percent. The highest VAT rate has been recorded in Hungary that charges its citizens at 27 percent on the goods and services value.
As per the local experts, the imposition of VAT will initially dampen the mood in the real estate sector as consumer is likely to pay more for property-related goods and services. There are also chances that the tax might turned out to have a cash flow issue with funds getting shifted from one account to another.
The people purchasing property directly from the developer in Dubai won’t be paying the Value Added Tax to the developer, therefore these property transactions will considered zero-rate. In this scenario, the developer will reclaim his input levy that he might have paid to the suppliers during the process of construction and completion of the project. Dubai’s secondary market is exempted from the VAT imposition at the point of sale. In this case, the property purchaser will be paying VAT on commissions and different governmental charges on the property documentation and transactions. These transactions may also include services like lease management service. On the other hand, the commercial property buyers have been set to pay the VAT on both off-plan and secondary market units.
Every new system brings with it confusion in the start but things settle down with time. All you need is the right team of VAT consultants Abu Dhabi to stay at par with the requirements and challenges associated with the VAT imposition in the United Arab Emirates.