The UAE government has just announced a few more details about the introduction of value-added tax (VAT), which is due at the start of next year.
We’ve known for a while that VAT of 5% will be applied to the majority of goods and services sold in the UAE on January 1. But details about exactly which goods and services will be taxed has been sketchy.
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Well, the UAE government announced late last week that it will issue laws on VAT and excise tax in the third quarter of this year, giving UAE businesses time to implement the processes required to comply with the new rules.
As a consumer, what you need to know is that, for many products and services, a 5% tax will be added to your purchases. However, with a number of products and services likely to be excused from VAT, this won’t automatically mean that everything will suddenly become 5% more expensive.
For example, real estate transactions are likely to be excused from the tax, along with a number of essential foodstuffs and life essentials.
As a result, the government reckons that overall consumer prices will rise by just 1.4% after VAT is implemented.
That said, certain product categories will see much steeper price increases by the end of this year. Apart from the new VAT rules, the UAE government is introducing new excise taxes on tobacco, energy drinks and sugary soft drinks. The price increase will be 100% for tobacco and energy drinks and 50% for sugar soft drinks.
If you’re a business owner, you should know that you’ll need to register for VAT before January 1. The government says that it’ll begin registering businesses in mid-September. However, you’re off the hook if you’re a properly small business – only firms earning $100,000 in annual revenue will have to register.