As of January 1st, 2018, the UAE has implemented VAT at a rate of 5%. Of course, despite VAT being introduced to the country, it does not affect every purchase. Some necessities such as food, healthcare, and education, do not always include VAT – these are commonly known as “zero-rated” items.
Until the introduction of VAT occurred, there was a lot of confusion and myth about what it would cover. Most of the speculation was around how much would need to be paid for each group of items.
However, on January 1st a full list of items that will come with a VAT charge was released by the government. This list said that the following items would have VAT added to them:
- Most foods and beverages now have a 5% VAT charger on them, while transport such as train tickets and plane tickets are exempt from the additional charge.
- Most healthcare is also exempt from VAT charges, however, elective and cosmetic treatments are not, these are to be charged at a 5 percent VAT rate.
- Private and public school costs, excluding higher education, do not come with VAT. Whereas, higher education costs now have a 5 percent VAT on them.
- School uniforms, school stationery, electronics like laptops and tablets, after-school activities, and school trips also attract a 5 percent VAT charge.
- Crude oil and natural gas are exempt from charges, while oil and gas products, such as petrol, come with a 5 percent VAT charge.
- The sale and rent of commercial buildings also come with a 5 percent VAT charge, while the sale or rent of residential buildings does not. Hotels, motels, and serviced accommodation now comes with an added 5 percent VAT now, whereas bare land does not.
- Most financial services are also exempt from the new VAT charge, but products with an explicit fee, commission, rebate, or discount are not, these come with a 5 percent VAT charge.
- For gold, silver, and platinum, metals that are over 99 percent pure and tradable in global markets come with no charge. But, metals that are less than 99 percent pure and jewellery, both come with a 5 percent VAT charge.
- Life insurance and life reinsurance are both exempt from VAT charges, whereas other types of insurance and reinsurance, including health, property, and motor insurance, all come with a 5 percent VAT charge.
- Then there are wired, and wireless telecommunications and electronic services, each of these are charged VAT at a rate of 5 percent.
When businesses have issued an invoice, details of the tax that the customer is required to pay should be shown on it. The public can report any complaints regarding VAT payments that they believe are being charged illegally to the Ministry of Economy.
The new VAT rules in Dubai state that businesses are not allowed to charge VAT unless they are registered with the Federal Tax Authority, they must also have a tax registration number.
So, it’s vital that businesses understand the rules and regulations in place regarding VAT and stick to them at all times, to prevent legal problems.