The constant decrease in the global price of oil has made UAE to introduce Value added tax to stabilize its economy. A drastic drop in revenue of over half of the value generated by oil in the past 12  months has triggered many economists including HSBC, Standard Chartered and the IMF to lower the growth forecasts and predict a sluggish growth for Gulf countries.
The UAE Ministry of Finance issued a statement announcing the implementation of VAT and a federal wide Corporate Taxation. However, the Government is offering an 18 month grace period in which the concerned entities will have to complete all formalities related to fulfillment of their tax obligations.
The Finance Ministry said that the draft law for a corporate tax is also still being drafted and that a grace period of no less than a year would be given for compliance once it is announced.
“An immediate announcement will be made once a final agreement on imposing a VAT law is reached,” the Ministry of Finance said. However, the draft VAT is still pending as there has been no consensus between GCC countries on the tax rate and items to be exempted.
The Government is planning to gradually implement the tax regime as UAE has enjoyed the status of being a tax haven for the corporate sector with millions of expatriates setting up their businesses in the UAE; and is feeling unsecure that it might lose its credibility as one of the least competitive destinations to set-up and run a business.
The introduction of VAT would make goods and services more expensive.
Economists believe that introduction of more taxes such as a levy on income would make UAE a less favored destination and the country may find it difficult to compete with developed markets. It is highly unlikely that the UAE will implement corporate tax on a broader version, but the move indicates that the prices of oil might stay low for a while.

Author: Alboren Hasanbelliu, handelot.com
Source: Kassem, Mahmoud. "18-month Grace Period When Value Added Tax Is Implemented in the UAE, Ministry Says | The National. The National’s Business, 19 Aug. 2015.