You must be aware that UAE is one of the top countries that have an exclusive market for the retailers. It is a world-renowned shopping hub especially its cities like Abu Dhabi and Dubai are famous for its malls, towers and shopping centres. People from all over the world are now touring the United Arab Emirates as their dream destination for a holiday.

However, the government seeks external help to curb the expenses of the public demands. To propose better infrastructural advancements and development programmes, the UAE government is one of the pioneers of the GCC to launch the VAT programme in the country. Even if the well-known fact is that it will hit the end consumers of various goods and services, however, it can be assumed that the introduction of VAT might create a visible impact in the retail sector of UAE.

The introduction of VAT in the year 2018 charged the retailers to pay a 5% tax on their production and sales. This has led to an increase or inflation in the products and services in the retail hub. Trades in staple food and other consumable goods have been exempted from taxes but other trades like the items like in the clothing sector, electronics and other luxuries have to pay the 5% tax on their capital. However, the non-staple items sold in the market for consumption will also have to entertain tax duties on their sales and production.

VAT impact in the Gulf Retail

It is a known fact that UAE is one of the richest countries in the world and 86% of its population has settled into its urban agglomeration, thus, paying taxes will not be a matter of concern for the consumers. The introduction of taxes might strike the psychology of the consumers but in a wider angle, their demands in luxuries or necessities would roughly cause an impact on the retailers as the general lifestyles of the inhabitants of the UAE are to delve into luxuries.

However, there are chances that the electronic market could suffer for a period. The demand for electronic goods in the UAE seems to be elastic as it decreases when there is inflation in the price of electronic products. Thus, the retailers of the electronic goods might have to meet up with the VAT charges of the government from their pocket as the graphs depicting the demands of the electronic items are likely to fall by the introduction of VAT.

Businesses earning a minimum annual income of Dh375,000 should register their company with the Federal Tax Authority of the United Arab Emirates. This is because if in case any company earning equal or more than the minimum annual income is found guilty of not registering with the FTA to prevent themselves from tax payments then it is very likely that the company will be penalised for the offence they caused.

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