The Value Added Tax (VAT) at the standard rate of 5 percent has been successfully implemented in the UAE from 1 January 2018. VAT is a consumption-based tax that is applicable to the supply of specific goods and services in the country.
The 5% VAT tax rate in the UAE is one of the lowest in the world. This ensures that there is no bad impact on the economy and on the common man. Still, there are visible VAT impacts in a range of industries in the country. Let’s find out more.
Table of Contents
- VAT UAE – Industry-wise Impact
- Download VAT Treatment on Selected Industries
- 1. Property and Real Estate Industry
- 2. Businesses Industry
- 3. Food Industry
- 4. Automobiles Industry
- 5. Healthcare Industry
- 6. Education Industry
- 7. Import and Export Industry
- 8. Finance, Insurance and Banking Services
- 9. Salary Industry
- 10. Free Zones Industry
- 11. Travel and Transports Industry
- 12. Agents/Brokers Industry
- 13. E-commerce and Online Shopping Industry
- 14. Fuel Industry
- 15. Gold and Jewellery Industry
- 16. Telecom Services Industry
- 17. Shopping Industry
- 18. Entertainment Industry
- 19. Contracting Business (or Contracts)
VAT UAE – Industry-wise Impact
Let’s take an overview of the impact of VAT on various sectors in Dubai, UAE.
Download VAT Treatment on Selected Industries
1. Property and Real Estate Industry
VAT is applicable at 5% rate on all types of commercial properties, whether rented or owned. There is no VAT on residential properties of more than 3 years old, however, newly constructed residential properties (not more than 3 years old) with rental/value more than Dh3,75,000 are taxable at zero rate. The VAT paid on taxable supplies can be recovered in some specific cases. Read more…
2. Businesses Industry
Businesses whose turnover is more than Dh3,75,000 in a financial year will have to pay VAT on their taxable supplies. However, the company revenue is not taxable under VAT. The tax will be levied at each stage of the supply chain in a business, but there is a mechanism of tax refund/claim to avoid tax cascading.
In addition, taxable businesses will also require to register for VAT and maintain proper tax records and accounts and produce the same as and when required by the authorities. Read in detail…
3. Food Industry
All kind of items including basic items like bread and rice will attract VAT. Contrary to earlier presumptions, the Federal Tax Authority has not kept food items zero-rated. The supply of food items would be taxed under VAT. Continue…
4. Automobiles Industry
The automobile is subjected to 5% VAT. VAT is exempted only on those automobiles which are bought on a Bank loan. The already overcrowded sector exceeds demand. VAT is also levied on Automobile service as well as on repair services. The VAT on service and repair further increases maintenance cost by a considerable amount. Read in detail…
5. Healthcare Industry
Preventive health services in UAE are zero-rated under VAT. Only Cabinet listed medicines and medical appliances are zero-rated under VAT. Cosmetic health service bills, as well as medical equipment, will attract 5% VAT. View more…
6. Education Industry
Government financed or qualifying educational institutions will attract zero VAT and are liable for input credits on VAT levied on such services during tax return filing. A 5% VAT will be imposed on other non-qualifying educational services. Zero-rated educational services must follow the schedule structured by the local or federal government body. Read more…
7. Import and Export Industry
Exports across the globe including GCC countries from UAE are zero-rated under the VAT regime. Oman is the only exception. Oman’s service sector firms/businesses will be levied 5% VAT on exports to UAE. Imports on the other hand attract 5% VAT. Facilities like Reverse charge mechanism and input credit claim will reduce the tax burden on UAE importers. Read in detail…
8. Finance, Insurance and Banking Services
Standard banking services like remittances and payments will be liable for 5% VAT. Customers will be charged 5% VAT on commissions, discount or rebate. No interest on credit card payments. Loans, mortgages, credit cards etc. have been zero-rated. Continue…
9. Salary Industry
VAT is a consumption-based tax. Salary, incomes, and revenues are free of the VAT.
10. Free Zones Industry
The FTA has exempted 20 designated zones from VAT regulations. Cabinet has also granted VAT exemption to the supply of certain medications and medical equipment registered with the MoH. To avail the 100% rebate, business owners/firms in the Free Zones must provide a correct and duly invoiced VAT. View more…
11. Travel and Transports Industry
Domestic transports will attract 5% VAT. International travelers within the GCC Nations as well as from GCC to other nations across the globe will be exempt from VAT tax. View more…
12. Agents/Brokers Industry
Irrespective of location and set-up of concerned parties, all kind of brokerage services will be subject to 5% VAT. Residential apartments have been exempted under VAT. However, commercial and non-residential buildings are subject to 5% VAT. Read more…
13. E-commerce and Online Shopping Industry
Online shopping gets costlier. Taxable goods and services availed via an online shopping or service platform are subject to 5% VAT.
14. Fuel Industry
Transport gets expensive. VAT is applicable on petroleum products at the standard rate of 5 percent. International transport is zero-rated under VAT. Crude oil and Natural gas remain free of the VAT and have been zero-rated. Read more…
15. Gold and Jewellery Industry
The new VAT laws levy 5% VAT tax on gold jewelry. Unlike the previous standard, VAT is now applicable on the whole jewelry pieces and does not include making cost. VAT is not applicable to metals with more than 99% purity. Continue…
16. Telecom Services Industry
Communication gets costlier now. Telecom services providers will impose standard 5% VAT on services and products availed by consumers. Some service providers may impose fine on late bill payments. Continue…
17. Shopping Industry
Online and traditional shopping will come under the 5% VAT slab. Tech Gadget lovers will now have to pay an additional 5% VAT on their purchases. Beauty Services like spa, saloon etc will also be subject to same standard VAT rate.
18. Entertainment Industry
Hospitality services will be costlier than before. Entertainment activities like movies, theme parks will attract 5% VAT. Refunds on bills from registered retailers for non-resident travelers only. Food and beverages will likely be costlier than before. Read more…
19. Contracting Business (or Contracts)
All Business contracts will be subject to the standard 5% VAT rate. The real estate cost is expected to be as competitive as before.