Income tax for UAE residents ruled out by finance minister

ABU DHABI // Expatriates may be asked to pay a government tax on money they send back home.

The Minister of State for Financial Affairs, Obaid Al Tayer, said on Tuesday a study was under way on whether to levy a charge on remittances.

“It is in its first stages,” Mr Al Tayer said. “No decision has been made with regards to this.”

He said further studies would be needed on factors including social and economic effects, and that a draft law had yet to be considered.

The UAE is also looking at doubling the tax on tobacco by 2017, in line with the GCC, and reviewing corporate tax laws.

And a Gulf-wide value-added tax could be in place within three years after the six countries adopted a draft framework in May.

But Mr Al Tayer ruled out introducing income tax.

“There is not any intention or study regarding placing taxes on the incomes of individuals at all. There is not any draft law or decision regarding this matter,” he said.

“As per the constitution, no tax will be imposed without a law. This is a clear clause.”

Mr Al Tayer on Tuesday appeared before the Federal National Council, which passed the federal budget for next year.

Forecast revenues for the year will reach Dh48.57 billion, as will expenditure.

The FNC also discussed the tobacco tax, which member Abdul Aziz Al Zaabi said would generate Dh6bn a year after it was increased. Levied on importers, it will double to 200 per cent of import duty by the start of 2017. The extra revenue will go into the federal budget, not the emirates’ budgets as it does now.

“Just by the UAE entering the GCC Customs union, there was a cancellation of the law issued in 1981 regarding tobacco tax, which said that the 100 per cent is divided between local and federal governments,” Mr Al Tayer said.

“Therefore, the federal government does not receive a mentionable amount.”

Mr Al Zaabi argued that on top of tobacco revenues, emirates other than Abu Dhabi and Dubai should start contributing to the federal budget, and resources other than oil should be used to finance it.

Mr Al Tayer said that all local governments would have to contribute the extra tobacco tax revenue to the federal coffers.

The value-added tax is not expected before 2018, if it is approved, and even then there will be a trial period of at least 18 months so businesses can become accustomed.

Mr Al Tayer would not speculate on the percentage of tax levied on products or what has been agreed on already, but he said “the picture will become clear for everyone” in the first quarter of next year.

This month the Ministry of Finance said 94 basic food items would be exempt from the tax, as would health care, education and social services.

Meanwhile, the draft law for corporate tax is in its preliminary stages and discussions are continuing, although Mr Al Tayer stressed that “no agreement has been reached until now”.

He told the FNC that the decreasing oil prices did not affect the budget that was approved in July.

“The federal budget is not connected with the price of oil, because the revenues of the budget are financed by contributions from the emirates of Abu Dhabi and Dubai,” Mr Al Tayer said.