Further to recent media reports on the introduction of VAT at a GCC level and a federal corporate tax in the UAE, the latest update from the UAE’s Ministry of Finance (MoF) on 18 August 2015 confirmed that the UAE is contemplating introducing both VAT and a federal corporate tax. The MoF confirmed that the latest feasibility study was completed earlier this year. According to the MoF’s website, the draft VAT law is still being negotiated as the GCC states have been unable to reach unanimity on the tax rate and tax exemptions.
An immediate announcement will be made once agreement is reached. The MoF also confirmed that businesses will be given approximately 18 months after the law is approved to fulfill their tax obligations. The draft corporate tax law is still under study. The MoF also confirmed that UAE businesses will be given no less than a year after the law is approved to prepare for the tax. Though timelines are not yet clear, the introduction of both VAT and a corporate tax system now seems more certain. Companies should immediately start assessing the impact of these taxes and begin preparing for implementation. We will keep you updated on any further developments. In the meantime, if you would like to discuss how your business might be affected by upcoming changes, or if you have any other questions, please do not hesitate to contact your regular KPMG Tax executive.
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