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Wed 23 Dec 2015 11:38 AM

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UAE rules out income tax, mulls levy on remittances

Senior official says studies are being conducted “but no decisions have been taken”

UAE rules out income tax, mulls levy on remittances

The UAE has dismissed plans to start taxing individual incomes but is considering proposals to introduce a tax on remittances, according to the country’s minister of state for financial affairs.

Obaid Humaid Al Tayer told reporters at the Federal National Council on Tuesday: “There is no intention and no plans to impose taxes on the income of individuals in the UAE.”

The UAE has been mulling a raft of tax reforms as it seeks to raise state revenues impacted by low oil prices.

It has already cut fuel subsidies and is planning to impose value-added tax (VAT) on consumer items.

Al Tayer warned taxing individual incomes or remittances could hike up companies’ wage costs and reduce the attractiveness of the UAE as a regional business hub, particularly for expats, according to Gulf News.

As a result, he said, the authorities have ruled out introducing income tax in the UAE.

However, he revealed that the government has begun conducting studies to explore the feasibility of taxing remittances sent home by foreign workers.

The studies are in the early stages and the government will refrain from introducing such a “significant” reform until the proposals are considered in detail, Al Tayer insisted.

He was quoted as saying: “The government may not proceed with such a significant move before they are thoroughly studied in terms of their socioeconomic impacts.

“Any studies will take into account the amount of these remittances and the socioeconomic impact on the UAE’s economy and foreign workers.”

No decision has been taken, nor any legislation drafted, Gulf News added. However, the government is considering introducing corporate taxes, it said.

“We are still studying the corporate tax law, which is still in its initial stages and it is being discussed with local governments and no agreement has been reached so far,” he said.

“The tax takes at least 18 months to be implemented. We need to determine which goods and services are taxed and which are zero-rated. The private sector also needs time and the government needs to take certain measures.”

Al Tayer was speaking after the Federal National Council passed the UAE’s federal budget of AED46 billion ($12.52 billion) for 2016.

Next year's budget was approved as part of a three-year federal spending plan of AED140 billion for 2014-2016. The balanced budget has revenues and expenditure of AED48.557 billion, Gulf News said.

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