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Wed 14 Aug 2019 11:54 AM

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Expo 2020 Dubai to help drive VAT revenues over $8bn this year

Over 307,000 businesses and tax groups registered for VAT in the UAE

Expo 2020 Dubai to help drive VAT revenues over $8bn this year
With 192 countries participating and more than 25 million people expected to visit Dubai for Expo 2020, it is expected that there will be a significant increase in consumption of goods and services.

Increased spending on Expo 2020 will help value added tax (VAT) revenues in the UAE push to over $8 billion (AED30bn) this year, according a Dubai-based tax consultancy. 

Revenues will also be boosted by a growth in retail, hospitality, aviation and shipping, but Rajiv Hira, chairman, RHMC Management Consultants, said the huge increases will not be sustained over the longer term.

Hira told Arabian Business: “Considering the distribution of $7.3bn (AED27bn) on account of value-added tax, it can be easily concluded to touch around $8bn (AED30bn), although we will be observing an increase in capital spending at a faster and larger scale, whereas VAT collection will not increase in that speed, due to the following factors: Entities will be entitled able to claim input tax on capital spending; and VAT is already paid on account of advances for the projects related to 2020 (including other capital spendings).”

CA Mahmood Bangara, chairman of Institute of Chartered Accountants of India (ICAI) Dubai Chapter, said he expected to see a boost from Expo-related spend.

“To achieve the Expo 2020 goals, more commercial activities will have to take place. Put together, it will contribute about 25 percent-plus in VAT collections in 2019,” Bangara told Arabian Business.

It was estimated that VAT would yield $3.2bn (AED12bn) in the first year of its implementation and up to $5.4bn (AED20bn) during the second year.

As of May 2019, the UAE Cabinet has approved distribution of the VAT revenues of approximately $7.3bn (AED27bn) between the federal government and local government. According to the decision, 30 percent of the revenue will go to the federal government and 70 percent to the local governments.

Jeanine Daou, PwC partner, Middle East Indirect Tax Leader, said Expo 2020 will increase overall economic activities in the UAE, and expand the consumption levels by businesses, tourists and residents. 

"Indeed, businesses will be investing in the UAE during the Expo 2020, which is expected to have a positive impact on the VAT revenues," said Daou. 

“This will mean potential additional revenues to be collected by the government, which will in turn invest into the UAE economy.

“With 192 countries participating and more than 25 million people expected to visit Dubai for Expo 2020, it is expected that there will be a significant increase in consumption of goods and services.”

The UAE and Saudi Arabia levied five percent VAT on goods and services from January 1, 2018 as part of a framework agreed upon by GCC members.

Latest figures from the Federal Tax Authority show that the number of businesses and tax groups registered for VAT surpassed 307,000, while the number of those that registered for excise tax totalled 724.