From January 1st, a 5% VAT will be applied to consumer products
One of the main advantages of living in the UAE as an expatriate is the lack of taxes. However, the UAE won’t be a tax-free country for much longer. Last summer, the Tax Procedures Law was issued indicating the introduction of a consumption tax – the VAT- from the beginning of 2018.
What is the VAT?
The Value Added Tax, abbreviated as VAT, is a consumption tax charged at each step of the production process and finally paid by the consumer at the moment of purchasing the product or service. In the UAE, it has been agreed that it will be applied as a percentage (5%) of the final price of the product or service.
Which products and services should not experience a price increase due to VAT?
- Residential properties
- Certain education services
- Certain health care services
- Certain financial services
- Basic food, such as milk or bread
- Local passenger transport
How will it affect me as an expat?
There won’t be any differences between locals and expats at the time of applying the VAT. Anyone purchasing non-essential commodities will have to face a 5% increase in the sales prices due to the VAT.
The good news is that education and housing won’t be affected by VAT. However, if your child is attending a private school, the situation might be a little bit more uncertain, as there is some ambiguity around how the taxes will be applied. It seems the education itself will be exempted from the VAT, however, additional services offered by the school might not be exempted.