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VAT Impact in UAE - Industry-wise Report

The UAE has successfully implemented the Value Added Tax (VAT), which is a consumption-based indirect tax system on goods and services, from January 1, 2018. The VAT shall be levied at the standard rate of 5 per cent on selected supplies of businesses whose turnover exceed Dh375,000. The new tax system is expected to affect all the industries and also the common man. Let’s discuss the impacts of VAT on different industries and sectors in UAE.

VAT Impact On Property and Real Estate

VAT is applicable at 5% on properties that are used commercially (rent or owned) and on newly constructed (not more than 3 years old) residential properties with rental exceeding Dh3,75,000. Read more

VAT Impact on Businesses

VAT is not charged on the revenue of a company/business, only on the taxable supplies made by the business. However, the annual revenue of a business is used to determine their VAT applicability.

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VAT Impact on Food

VAT at 5% is applicable on all food items, including bread, coffee, rice, milk, etc.

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VAT on Automobiles in UAE

VAT at 5% is applicable on auto-maintenance and repair services as well. It shall also be levied on the sale and trading of used auto parts.

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VAT Impact on Healthcare

Most of the basic healthcare and pharmacy services, including medical, dental, vaccinations and other treatments provided by licensed authorities are kept zero-rated under VAT. 5% VAT is applicable on cosmetic healthcare supplies. click here for details

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VAT Impact on Education

Education supplies and services provided by ‘qualifying educational institutions’ in UAE are zero-rated under VAT. Most other education services, including school uniforms, food, field trips, etc., are taxable at the standard rate of 5%. There is no VAT on school tuition fees, however there is a 5% tax on the fees of private universities.

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VAT on Import and Export

5% VAT is applicable on all imports made by a UAE business from any foreign country. However, the exports made from UAE to other countries, including GCC countries, are zero-rated under VAT.

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Finance, Insurance and Banking Services

There is a 5% VAT on money transfer and remittance charges (fees) levied by banks and financial institutions. The tax shall be paid by the person making the transfer.

There is no VAT on ATM transactions.

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VAT on Salary

VAT is a consumption based tax, it is not applicable on salary, incomes and revenues.

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VAT on Free Zones

The 20 designated zones in the UAE have been exempt from VAT, but there will be a zero-rate tax on the supply of certain medical equipment and medications in these regions.

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VAT Impact on Travel and Transports

VAT is applicable at zero percent on the international transport (from GCC to GCC or GCC to other countries) of passengers and goods, however VAT at 5% will be levied on all domestic (within the country) transports. Local passenger transports have been exempt from tax. Public transports, including train, bus, metro, tram and flights, are also VAT-free.

VAT shall be levied on the shopping of travel packages online.

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VAT on Agents/Brokers

The value-added tax is applicable on all kinds of brokerage services that are performed in the UAE, irrespective of the location of the involved parties.

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E-commerce and Online Shopping

All sales and purchases of taxable goods and services performed through an online website such as eBay or Namshi are liable to the standard VAT of 5%.

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VAT on Fuel

The prices of petrol are increased since VAT is being levied at 5% rate on petrol and gasoline. However, there is no tax (zero-rated) on crude oil and natural gas.

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VAT on Gold and Jewellery

VAT at the standard rate of 5% will be levied on the purchases of gold jewellery and coins, but not on the making cost. There is no tax on gold, silver and platinum jewellery (investments) with more than 99 percent purity.

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VAT on Telecom Services

The 5% tax will be levied on all types of mobile communications, including mobile bills, prepaid recharge cards, online recharges, postpaid bills, etc. VAT is also applicable on most others telecom products and services.

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VAT on Shopping

The tax rate on shopping of products will depend on their tax eligibility. VAT at 5% will be levied on the purchase of tech products and services. The purchase of spa, saloon and other beauty services and products is also covered under VAT.

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VAT on Entertainment

Going to cinema will also cost you more since there is a 5% VAT on entertainment services.

The tax will also be levied on the cost of other entertainment services such as theme parks and related venues.

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VAT on Contracting Business (or Contracts)

VAT is applicable at the standard rate of 5% on all business contracts.

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