Goodwins Law Newsletter

October 2015

Impending Taxation
VAT Legislation in the UAE

Tax Strategy and Corporate

Responsibility

The UAE Ministry of Finance (MoF)

on the difference between the

Payment of tax by a company

recently confirmed

an

purchase cost of an asset and

contributes to the nations budgetary

immediate announcement will be

the price at which it can be sold

outlay for the societys wellbeing.

made once a final agreement on

(i.e., the amount of value

imposing a Value Added Tax

added to it). Producers and

(VAT) law is reached. Concerned

distributors typically pass the

sectors and entities will have

cost of the VAT on to the final

around 18 months after imposing

consumer in the form of price

the law to implement and fulfill the

increases. Tax is added to a

Ethical values do play a role in

requirements

tax

product's price each time it

formulating

obligations. This timeframe was set

changes hands until delivery

strategy, which is not a mere legal

by MoF due to the UAEs previous

to the customer takes place,

approval of the draft VAT law

when the final tax is paid.

of

that

their

framework, to be applied on a GCC

level.

A value-added tax (VAT) is a fee

appropriate Tax Clause(s)' be

assessed against businesses at each

included

step

agreements of all business

the

distribution

production
process,

and

usually

the nation for the right to operate

within it.

companys

tax

concept.
Tax evasion and tax avoidance are
reduction of tax liability. Avoidance

legislation, it is advisable that

of

the business; it is rather a fee paid to

terms in vogue in the realm of

Tax Clause
In light of the impending tax

VAT

Tax is not just an overhead cost to

in

all

ongoing

is legal whereas evasion is not. The

difference between the two terms
was aptly coined by former UK
Chancellor of the Exchequer Denis
Healey as being the thickness of a
prison wall.

entities in the UAE.

whenever a product is resold or

value is added to it. A VAT is levied

Fair-trade principles that form part

of corporate responsibility are these
days being extended to tax. A
pragmatic approach to tax and
corporate

responsibility

is,

Entities will have around 18 months after imposing the law to

therefore,

implement and fulfill the requirements of their tax obligations

companys tax strategy with its more

to

synchronize

broader business strategy.

Written by Sreekumar Radhakrishnan, BA, LLB, LLM, Senior Legal Consultant, Goodwins Law Corporation UAE
Website: www.gooodwinslaw.ae Email: info@goodwinslaw.ae Tel: +97126737338