UNITED KINGDOM
In 1973 the United Kingdom introduced value added tax, the Conservative Chancellor Lord Barber set a single VAT rate at (10%) on most goods and services. Today, VAT is the third largest source of government revenue, after income tax and national insurance.
Businesses that provide “taxable” goods and services and whose taxable turnover exceeds the threshold must register for VAT. April 2012, the threshold was set at GDP 77,000 and was amended in 2016 to GDP 83,000 making it by far the highest VAT registration threshold in the world.
Businesses may choose to register even if their turnover is less than that amount. All registered businesses must charge VAT on the full sale price of the goods or services that they provide unless exempted or outside the VAT system. The default VAT rate is the standard rate, currently at 20%. Some goods and services are charged lower rates (reduced or zero).
The below table displays the increase rate of VAT over the years.
| UK STANDARD VAT RATES |
YEARLY CHANGES | VAT RATE |
1979 – 1991 | 15.0% |
1991 – 2008 | 17.5% |
2008 – 2009 | 15.0% |
2010 – 2011 | 17.5% |
2011 – Current | 20.0% |
Currently there are over 5,000 British companies in the UAE. When you compare the UK VAT rate to the UAE rate we predict many UK firms will still want a UK company setup in Dubai due to the comparatively low VAT rates.
INDIA
VAT was introduced into Indian taxation system from April 2005. The existing general sales tax laws were replaced with the Value Added Tax (2005) and associated VAT rules. As of June 2014, Vat has been implemented in all the states and Union Territories of India except Pondicherry, Andaman and Nicobar Islands and Lakshadweep Island.
With effect from July 2017, Indirect Taxes such as: Excise Duty, Value Added Tax/ Central Sales Tax, Service Tax, Entry Tax/ Octroi Tax etc. was replaced with a single levy of Goods and Service Tax (GST).
| GOODS AND SERVICE TAX (GST) |
| PARTICULARS | RATE |
| Standard rate | 18.0% |
| Reduced rate/other supplies apply to: fruit juices, medicines and paper | 12.0% |
| Super reduced rate/other supplies apply to: food grains, tea and fertilisers | 5.0% |
| Exports and supplies to Special Economic Zones | 0.0% |
| Fresh fruits, vegetables, cereal, and bread to mention a few | Exempt |
| Higher rate applies to luxury/sin goods such as: cars, tobacco and paints. | 28.0% |
Bilateral trade between India and the UAE amounts to around $53 billion. UAE is India’s third largest trading partner; India is the largest trading partner for the UAE. Therefore, the impact of 5% VAT and any slight incremental increases should not affect the strong ties and will continue to see India’s top investors and entrepreneurs starting a business in Dubai.
AUSTRALIA
The Goods and Service tax in Australia is a Value Added Tax of 10% on most Goods and Service sales. There are some exceptions such as: certain food, healthcare and housing items. GST is levied on most transactions in the production process and in many cases refunded to all parties in the chain of production other than the final consumer. (Creation comment: Australia did not mess around, choosing to implement a starting rate of 10%. It should be noted however that this did streamline taxation as various sales taxes were removed).
All Australian businesses whose turnover is above the minimum threshold (currently at $75,000 per annum) are required to register for GST. Those businesses whose turnover is below the threshold may also register if they wish to.
UAE is Australia’s 15th largest trading partner and largest export destination in the Middle East. The UAE is a major hub for Australian firms looking to do business in the Middle East and North Africa. We expect Australian companies will continue to look to the UAE and have a business setup in Dubai regardless of the 5% VAT in the UAE.
CANADA
Canada has a mix of Federal and Provincial VAT (Sales Tax Systems). Generally, the federal Goods and Services tax (GST) applies to taxable Goods and Services supplied in Canada. The Harmonized Sales Tax (HST) is merged federal/provincial Sales Tax that includes a 5% federal component and provincial component that varies from 8% to 10%. HST applies in the provinces of Ontario, New Brunswick, Nova Scotia, Prince Edward Island and newfound land and Labrador. The province of Québec applies its own Value Added Tax (VAT), the Québec Sales Tax (QST).
There have been changes in the rates of indirect taxes all over Canada. Currently the rate of GST is ranging from 12% to 15% throughout various states.
SINGAPORE
April 1994, GST was implemented at a single rate of 3% with the assurance that it will not increase for at least five years. Singapore’s GST rates at 3% was among one of the lowest in the world. The main focus with the introduction of GST was not to generate substantial revenue, but to enable its citizen’s time to adjust.
| SINGAPORE STANDARD VAT RATES |
YEARLY CHANGES | VAT RATE |
1994 | 3% |
2003 | 4% |
2004 | 5% |
2007 – Current | 7% |
Goods and Service Tax (GST) is set to increase from 7% to 9% over the years from 2021 to 2025. The government is planning to increase spend over the years on healthcare, infrastructure and security.
Singapore Government explored various options to manage their future expenditure through judicious spending, saving and borrowing for infrastructure. As a result there was the need to slightly increase the rate of GST. It is suggested that this percentage point will provide the government with an increase in revenue of almost 0.7%.
Many Singaporean multinational corporations have chosen to locate their MENA regional headquarters in the UAE. It is a central hub and easily enables operations across multiple time zones. Should the UAE slightly increase VAT we doubt this influence the number of business setup in UAE.
We can identify that once VAT has been introduced to a country, trends reveal over time it steadily increases. Creation Business Consultants Managing Director – Scott Cairns foresees that “the UAE will not increase the rate of VAT…. Just yet. The introduction of VAT has been generally well accepted by businesses and consumers alike. Our opinion is that Expo 2020 will see a massive inflow of FDI through investors starting a business in Dubai. If the VAT rate were to increase around this time, most foreign investors would not notice a few percentage points increase whilst government coffers would benefit immensely.”
