Introduction of VAT and Corporation Tax in UAE Unlikely to Deter Foreign Investors
The Links Group, one of the UAE’s leading providers of commercial facilitation and advisory services, says the introduction of a value added tax (VAT) and corporation tax is unlikely to deter foreign investors from establishing a commercial presence in the country.
John Martin St. Valery, founding partner of The Links Group said: “Plans to introduce a federal tax system have been mooted for some time now as the UAE steps up efforts to consolidate non-oil revenues. Although a major shift in fiscal policy from a country widely recognised for its low tax status, we consider this a sign of a maturing market, with a diminishing natural resource, taking the long term seriously.
“The introduction of a sales tax and broadening of the corporation tax are obvious steps forward and, although they will necessitate changes to the administration of locally-registered companies, the anticipated low rate of taxation applied is unlikely to impact foreign investors who are typically familiar with these types of taxes.
“These taxes are also an indication to foreign investors that the UAE government recognises offering and implementing world-class infrastructure services comes at a cost. The benefits of existing infrastructure, geographical location and ease of travel, communication, and safety and security of the country more than outweigh any perceived costs.
“An efficient low tax environment is unlikely to see an exodus of expatriates or deter foreign investors from entering the market. Both Singapore and Hong Kong are testament to this. The UAE enjoys a similar geographical advantage as these markets, in terms of being a gateway to the fast-growth economies of the Middle East, the Indian subcontinent and Africa.
“We are following closely the updates from the Ministry of Finance in order to best prepare our clients for the possible financial consequences of sales and corporation taxes in the UAE.”