Saudi Arabia and the UAE to introduce the VAT for the first time

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Value added tax (VAT) in Saudi Arabia and the United Arab Emirates for the first time.

The 5% tax for most goods and services.

Gulf States have life-long attracted foreign workers with the promise of tax-free.

But the governments want to increase revenue in the face of lower oil prices.

The tax entered into force on 1. January in the two countries.

The UAE estimates that in the first year revenue of around 12 billion Dirham (£2.4 bn; $3.3 bn in VAT).No plans for the income tax

Petrol and diesel, food, clothing, utility bills and rooms, all of which have now applied to the VAT.

But some issues have been made exempt from tax or zero-tax-assessment, including medical treatment, financial services and public transport.

Organizations such as the International monetary Fund have long called for the Gulf States, to diversify income sources away from oil-reserves.

In Saudi Arabia, more than 90% of the budget revenues come from the oil industry, while in the United Arab Emirates, it is around 80%.

Both countries have already taken measures, to the Federal Treasury increased.

In Saudi Arabia, this is a tax on tobacco-and alcohol-free drinks, as well as a reduction of some subsidies offered to the locals. In the UAE toll was hiked up, and a tourism tax was introduced.

But there are no plans for the introduction of the income tax, where the majority of residents pay 0% tax on their revenue.

The other members of the Gulf cooperation Council – Bahrain, Kuwait, Oman and Qatar – have also committed to the introduction of VAT, although some have plans been delayed until at least 2019.