Tuesday, January 28, 2020

VAT in Recent years

UAE, Saudi Arabia and Bahrain have already levied VAT in recent years.


"VAT is something people don't like it but this is something we have been lobbying for. It will come into effect sometime in the beginning of the next year," said Ali bin Masoud Al Sunaidy, Minister of Commerce and Industry in Oman.

Currently, three GCC countries, UAE, Saudi Arabia and Bahrain, have levied VAT as agreed by the six member countries. Oman will most likely be the next GCC country to join the league.
A study by EY had predicted that the adoption of VAT by GCC countries would generate additional annual revenues of $25 billion.

The minister said Muscat is targeting 2.5 per cent to three per cent economic growth this year, unless some geopolitical tension emerges in the neighborhood. They are also looking at diversifying the economy. Reforms are inevitable because when oil prices crashed, our GDP crashed tremendously from 30 billion Omani riyals to 26 billion riyals, but now it is back to 30 billion riyals.

The minister hopes that the oil price will cross $70 a barrel which will be helpful for regional economies. The economy is being revived at 465 but $70 would be more comfortable for most of  the region, not just Oman. However, at $65 and even $60 to $65 barrel, Oman will look more seriously at tourism, manufacturing, fisheries and logistics sectors.

Tuesday, January 14, 2020

Online sales’ contribution to VAT

E-commerce to contribute significantly to VAT revenue


E-commerce is expected to significantly bolster government revenues from value added tax (VAT) in the UAE, data on fast growing online sales indicate.

The UAE introduced VAT in 2018 as part of its fiscal strategy to diversify the government revenues. VAT, essentially a consumption tax is universally applicable for all purchased including online purchases with very few exceptions.

In the case of online purchases, according to the Federal Tax Authority (FTA) all purchases are subject to the same 5 per cent VAT as any other purchase made through traditional outlets if the products purchased online are received within the UAE.

The VAT revenue from online sales are becoming increasingly significant in the overall tax revenue in the context of the significant growth in UAE’s e-commerce.

According to a recent study by Visa International and Dubai Economy, the UAE’s ecommerce sales are projected at $16 billion (Dh59.billion) in 2019. At 5 per cent VAT rate, online sales is estimated to have contributed nearly Dh3 billion to government revenue last year.

UAE’s tax revenue, including value-added tax (VAT) made up 5.5 per cent of the total public revenue in 2018, according to the Ministry of Finance (MoF).

The UAE’s total overall revenues reached Dhs456 billion in 2018, of which tax revenues made up Dh25 billion.

The UAE’s decision to introduce VAT benefited the country, as it recorded a budget surplus of 2.2 per cent in 2018, compared to deficits of 0.2 per cent, 1.3 per cent and 6.4 per cent in 2017, 2016 and 2015, respectively.

Currently, the UAE is considered the most advanced ecommerce market in the Middle East and North Africa (MENA), with a penetration rate of 4.2 per cent; the Kingdom of Saudi Arabia (KSA) follows at 3.8 per cent.

ref: Gulf News