DUBAI — The ruler of the United Arab Emirates has issued a decree that sets the stage for value-added taxes to start being collected in the country beginning in January.

The state-run WAM news agency carried a statement Sunday on the decree issued by Sheikh Khalifa bin Zayed Al Nahyan, the UAE’s president and the ruler of Abu Dhabi.

WAM said the 5-percent tax “is to be imposed on the import and supply of goods and services at each stage of production and distribution, including what is deemed to be a supply.”

All six members of the Gulf Cooperation Council have agreed to begin collecting so-called VAT taxes, though others may begin later than January. The GCC includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE.

Meanwhile, seminar organized by the Middle East Solar Industry Association (MESIA) and The Big 5 Solar shed light on VAT legislation and its impact on the growing solar industry in the UAE.

Companies must prepare themselves for the “massive changes” that the introduction of the VAT is bringing to the GCC region, warns Michael Vaughan, Director of Tax at Grant Thornton UAE. Speaking at the “How will VAT impact the Solar Industry” seminar organized by the Middle East Solar Industry Association (MESIA) and The Big 5 Solar, the VAT expert stressed the necessity for enterprises to get ready for the forthcoming transition.

VAT is currently present in 150 countries and contributes to 20% of worldwide tax revenues. Earlier this year, the GCC members ratified the VAT framework agreement, and a UAE law is expected to be enacted by the end of August. Starting from Jan. 1, 2018, a 5% VAT rate will be applied to most businesses; the mandatory registration threshold will be AED 375,000, while a voluntary registration option will be available for companies making supplies of 50% or more of this figure, that is at least AED 187,500.

Although the UAE law on the VAT system is yet to be introduced, Vaughan urged companies to stop immediately from issuing contracts without a VAT clause and to “start training their staff”. “There’s a huge transformation underway in the region, and VAT is part of this change,” commented Ahmed Nada, President of MESIA, stressing that “all of us need to understand how this will affect the industry”. — AP/SG