Value Added Tax is all set to begin its regime in the UAE region from January 1, 2018. It is expected that the new tax system will strengthen the nation by generating more revenues from non-oil businesses.
VAT is an indirect tax that is not based on the income but works with expenditure. It is applicable to goods and services within the value chain based on the value each state till it reached the end consumer, which the final taxation level.
some people fear that tax bring some negative meaning and the impact is very serious. So, to understand it better, it is important to learn how it is going to impact the household financially. As the VAT is a consumption-based tax, therefore it is important to take note of your consumption habits. Not every item is liable for VAT.
If your household items include only necessary items then the shopping bill not increase and will be under five percent bracket. The major impact of VAT will be experienced when you opt retail shopping.
Also, the retailers need to prepare for the upcoming VAT regime. This is what they should be looking forward to the VAT rollout:
Improving IT Infrastructure
For the smooth working of the VAT system, it is recommended to upgrade the existing systems. The major task is to frame a network of tax professional’s that needs to be executed at an early stage.
The requirement of tax professions with some experience in the VAT will go high. As it is the part of the pan-GCC, the demand for such professionals will go high.
The major challenge for retailers is to plan the discount strategy. Looking into the sale culture in the retail capital Dubai, the impact of VAT will be levied on the retailer community.
Acknowledge Consumer Mindset
In order to understand the impact of VAT on Household Budget, it important to know the consumers. The tourist factor is the most highlighting here. How will the refund for tourists work, which is an important part of the retail sector?
According to experts, the net impact of VAT on UAE median households would be around 3 percent, which is minimal. Furthermore, the initial impact is expected to taper within three to six months as consumers get used to the VAT impact (similar to Salik).