For companies, the increase in cost due to VAT can be shifted to the customers and the operating cost of the company is likely to go up while implementing VAT. Additional costs for the company will be on;
1. Employment cost of new/additional staff to handle accounts, IT, documentary controls etc.
2. The cost to make necessary changes in the existing software of the company or to buy new software to accommodate VAT, training cost to the staff
3. The cost of additional working capital required to meet the Tax Liability and to ensure that the compliance procedures are met by appointing a Tax Expert.
In case of Individuals in UAE, the impact of VAT on blue collar workers will be negligible but for middle class there will be a hike in the price of items/services which are not exempted from VAT so the increase in the cost of living of individuals will be there to a certain extent.
The VAT rate in UAE is the lowest compared to other countries so the introduction of VAT in UAE will not a have a significant increase in the cost of living/operation of the companies in the UAE.