The United Arab Emirates will introduce a value-added tax of as much as five percent to replace the existing customs duty, Emirates Business 24/7 reported, citing Dubai Customs.

The final decision on the VAT rate and the timing of its introduction will be decided by the federal government, the Dubai-based newspaper cited Ahmed Butti Ahmed, Director General of Dubai Customs Authority, as saying.

All six Gulf Arab states are planning to introduce the sales tax as early as 2012 to replace earnings from custom duties that will be eliminated as free trade agreements are signed with international trading partners, including the European Union, the U.S., India and China.