A Comprehensive View on Possible Impact of VAT on Expats in UAE

With the VAT Laws all set to be implemented in UAE, there are certain regulations and charges that will be imposed on the expatriates by the exchange houses. These charges and tax amount to be imposed on the remittances may come under the concerns of imminent VAT, according to reports published by Khaleej Times.

Speculation is rife that the new consumption charge may get applied on the fee charged on UAE remittances by various exchange companies. It has also been reported that VAT may not be imposed on the entire amount that is remitted by the expats of the country back home.

According to UAE Exchange Group’s CEO Promoth Manghat, the VAT to be imposed on the remittance fee has been a speculative subject among the various service providers and media for a while. As per the Khaleej Times report, the CEO also stated that according to the information coming from experts, there is a near future possibility that the remittance fee may be subjected to VAT.

COO of Xpress Money Sudhesh Giriyan came up with almost a similar opinion by saying that their initial indications are that the VAT might not be applicable on the remittance amount directly. As per the Khaleej Times report, Giriyan speculated that the amount might be applicable to the customer fee that is needed in order to send out the remittance.

The UAE Ministry of Finance has announced that the system of VAT implementation in UAE will be clarified shortly. So now it is to be seen how things work out in the near future with the rate of VAT charged on remittance services and the likes.

The estimated 7 million expats in the UAE come from countries like Egypt, Sri Lanka, Pakistan, Bangladesh, India, Philippines and more, and there are several employees from these countries who are blue-collar workers in the country.

According to one of the current reports presented by International Monetary Fund, imposition of about 5% tax on the expatriate remittances of GCC will be resulting into marginal revenue of only 0.3 percent of the territory’s GDP. But such imposed tax would give rise to operational and administrative costs. This may result into risks related to the reputation of the country among the employees. One may even see a decline in the competitive market of the private companies.

Fees charged on Remittance Services

For remittances from various passages of the world, the range of the charged amount on an average scale is between Dh 15 to Dh 35 for Middle East Asia and Asia, between Dh 35 TO Dh 55 for countries like Europe, UK and U.S.A, and the charge is Dh10 to Dh 20 for Asia. This means that a VAT rate between 50 Fils and Dh 2.75 may be added to the entire amount. Well, it is also to be noted that it would only happen if the exchange houses take the decision of passing on the full burden on remitter.

So, for the time being, it can therefore be concluded that the rate of VAT imposed on the remittance fees may not bring forth a major impact on expats.

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