Dubai - The PWC report noted that it takes 12 hours to comply with tax payments as compared to 29 hours in Bahrain
The UAE has retained its top global ranking in terms of ease of payment of taxes, thanks to fewer taxes in the country.
Analysts are unsure about the impact of the VAT on the country's ranking, however they see the authorities going in the right direction with digital platform and regulations.
Released by World Bank and PriceWaterhouseCoopers on Tuesday, the Paying Taxes 2018 report noted that it takes just 12 hours to file taxes in the UAE as compared to 29 hours in Bahrain, 47 hours in Saudi Arabia, 55 hours in Luxembourg, 63 hours in Switzerland and 64 hours in Singapore. The report comes at a time when the UAE and Saudi Arabia are set to roll out value-added tax (VAT) at five per cent - which is also one of the lowest in the world - from January 2018.
Analysts expect the UAE's position to remain strong as it is deploying digital platform for the VAT implementation for tax filing and returns.
Replying to a question about the impact of VAT on the country's ranking following its introduction, Nadine Bassil, partner, PwC, said: "We will have to see after the VAT implementation whether it affects the country's ratings. To my understanding, the VAT filing and payment are going to be electronic; even the procedures are based on the best practices for quick VAT refund and risk-based audit. We expect the position of the UAE to remain strong."
Girish Chand, director, MCA Management Consultants, said that despite the UAE being the latest entrant in the VAT regime, it has adopted simple and logical implementation of VAT.
"This has been done by maintaining a single rate of taxation at five per cent and keeping very limited activities in the zero rated and exempt category. Also the tax return mechanism is very simple where the information required is at summary level. The tax authorities have facilitated an online return filing mechanism making it convenient to file the return," Chand added.
Joanna Nasr, Paying Taxes leader and private sector development specialist, World Bank, said it's unclear how the VAT will have its bearing on the UAE's ranking of Ease of Doing Business - where it was ranked 21st but the authorities are moving in the right direction by adopting digital platforms for tax filings and returns.
"We'll see how the whole system is implemented in terms of compliance and how easy online platform is going to be for filing of tax return, and what is the data that is needed, and how quick companies can submit data. All this will matter."
She noted that the UAE regulations have right framework as the authority is working on a digital platform which is the best practice.
The UAE is "working on simplifying filing returns so this is a good sign. With VAT introduction, the UAE is implementing an easy system so we hope that it will be not a burdensome procedure."
The report examines the ease of paying taxes in 190 economies. It revealed that 162 economies have a VAT system, with a VAT refund available to the case study company in 107 economies. However, there is no VAT refund available in 51 economies, particularly in South America and Africa, it said.
According to Paying Taxes report, the world average to comply for tax compliance is around 240 hours and 195 hours in Arab league and 161 hours in European Union countries.
This high ranking in the UAE is attributed to the few taxes levied in this part of the world as compared to other nations which have imposed a number of taxes on the residents and companies.
The report found that the UAE achieved strong rating in terms of number of payments at four - which is the second best in the world after Saudi Arabia (3) - and ahead of Singapore (5), New Zealand (7), Switzerland (19) and Luxembourg (21). This is in comparison with GCC average of 8.7 payments, 12 in EU countries, 20.5 in Arab League and 24 in global average.
The GCC has performed well to-date on the Paying Taxes sub-indicators in part to the low number of taxes in the regional countries. However, the introduction of VAT will increase the number of taxes in the countries with a corresponding impact on the time and payment indicators, it said.
According to the report, the Middle East is still the easiest region in which to pay taxes, thanks to technology and innovation which ease the burden of tax compliance for the companies.