Businesses in the UAE, that earn yearly revenues of over AED3.75m ($1.02m), will have to register with the authorities to be taxed under the Value Added Tax (VAT) system, according to Younis al-Khoury, undersecretary at the country’s Ministry of Finance.

Firms recording revenues between AED1.87m and AED3.75m can choose to register under the system during the first phase of rolling out of the VAT system, local Gulf News cited Al-Khoury as saying.

Registration will eventually become obligatory for all companies when the government rolls out Phase 2, but that the ministry is still discussing a date for that.

The introduction of a 5 per cent VAT across most GCC countries, is scheduled to be introduced in 2018, which will open an alternative revenue stream for the Gulf states that are struggling with the decline in oil prices, their main source of revenue. In February 2016, the IMF said oil-exporting countries in the Middle East and North Africa lost over $340 billion in oil revenues from their budgets in 2015, amounting to 20 per cent of their combined gross domestic product.

The UAE has committed to introducing the tax on 1 January 2018, while other GCC countries have until the 1 January 2019 as both the public and private sector will need time to prepare.

Al-Khoury had earlier confirmed that GCC countries are yet to finalise their implementation policy. One hundred basic food items, healthcare and education will be exempt from the tax in the UAE. Although, the size of the new revenue is difficult to estimate, but should be a higher proportion of GDP in the UAE due to its high levels of private consumption, and lowest in Qatar.

Analysts, however, estimate that annual revenues from a VAT rate of 5 per cent could reach about AED9bn-10bn annually, based on estimates from point of sales (POS) terminals in the UAE for 2015.