UPDATE: The UAE government has released a comprehensive document on which products and services will be applicable to VAT. Click here for a list of exactly what will be taxed.
January 2018 isn’t far off, and everyone should know by now that the UAE will be implementing a value-added tax (VAT) of 5% at the turn of the New Year.
VAT in the UAE will be set at one of the lowest rates in the world, and it’ll be applied to the majority of goods and services. As the deadline nears, we’ve been keeping you updated with everything that you need to know.
The Federal Tax Authority (FTA) released a draft executive regulation earlier this month and it’s become clearer which goods and services will be taxed, and which ones will be exempt.
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There has been some confusion surrounding whether private education would be subject to a 5% rate hike. But it was announced that healthcare and education have escaped being taxed as the FTA announced that both institutes will be zero-rated. That said, non-government-funded universities will have to include the 5% tax on their fees.
And as a consumer, many products and services will have a 5% tax added to the purchase price. In 2015, nearly 100 food items were initially announced by the Ministry of Finance to be zero-rated, but that no longer seems to be the case. It now looks like all food types, including staples such as bread and rice, will be taxed.
But it isn’t as bad as it sounds. For example, the average cost for a loaf of white bread (500g) is around AED 4.76, with the added 5% tax you will now have to start paying nearly AED 5.
The FTA also clarified that both water and electricity will be taxed. According to the document, Dubai Electricity and Water Authority (DEWA) will be treated as supplied goods and therefore it will have 5% VAT added to it.
But there is some good news. If you have any friends or family coming over to visit you, any tourist visiting the UAE will be able to claim VAT back on any purchases they make while visiting the country. The FTA still hasn’t officially announced how this will work, so keep your eyes open for any changes.
SEE ALSO: It’s not just goods and services that will go up next year, home insurance prices will be taxed as well
The biggest struggle has been for businesses. Businesses have been urged to register for VAT before December 4 in order to avoid paying tax out of their pocket. In May, a survey showed 52% of businesses didn’t have an implementation strategy and 60% had not assigned a budget for the change.
The introduction of VAT could generate AED 12 billion in its first year and AED 20 billion in its second year, according to Sultan Al Mansouri, Minister of Economy, as the UAE moves to diversify away from oil.