The Value Added Tax (VAT) has been launched on January 1 in UAE have brought many changes in the price structure of the goods and services in the country. While some basic things like school fees will be exempt from tax, many other essential items such as water, food, and jewelry may be included in the VAT. However, the low tax rate of 5% is not expected to make a very big hole in the pockets of most people.
Even if the prices of some products or services change after VAT implementation, the difference should be too minor to be noticed. And since most of the food items in the country are imported and prices fluctuate on regular basis, people are not likely to mind the difference.
The VAT in UAE has been levied at a fixed rate of 5 percent on all applicable items, which is much lower as compared to other countries.
The tax will also be levied from the tourists visiting the country, however, the tax paid by tourists will be refunded back to them at the airport. read more here: VAT refund scheme for tourists
Check out below the list of goods/services taxed under VAT
- Electricity bills (Power)
- Car rentals
- Dining out
- Commercial rents (Renting out for commercial purposes)
- Plastic surgery
- Uniforms of private and public schools
- Water bills
- Tenancy contracts
- Service apartment
- Private school books
Goods/services exempt from VAT
The following items/services will be VAT exempt:
- Medical fees
- Air travel
- Basic and preventive surgery
- Exam fees
- Local transport
- Residential rents
- Public school books
The VAT will also be applicable to the free zone companies making supplies outside the zone. This might increase pre-financing cost for such companies.
- VAT in UAE: What Are Zero-Rated Supplies under VAT
- VAT in UAE: What Are Exempt Supplies under VAT
- The zero-rated and exempt supplies under VAT in UAE
- FTA UAE – 20 Designated Zones Exempt From VAT