Value Added Tax in UAE:Learn more about VAT, It’s implementation in UAE and it’s effect on residents and tourists in UAE with us, Dubai 24-7. What is VAT? VAT-or-Value Added Tax is a type of consumption tax that is placed on a product whenever a value is added at a stage of production and at final sale. Value-added taxation is based on a taxpayer’s consumption of goods rather than his income. In contrast to the current income tax, which levies more taxes on high-level earners than on low-income workers, a VAT would apply equally to every purchase.
VAT in Dubai:VAT in Dubai is going to be implemented in Dubai from 1st January 2018. It will be levied on almost everything including housing and renting, except educational institutions and some essential goods, however, a law stating exempted items from it is yet to be issued. So far, from the official sources, it is come to notice that the drafting of the laws by the ministry is complete and will be issued in a few month’s time.
What to expect in UAE?There will be changes in the country in terms of pricing, however not up to a drastic extent since the VAT rate is low. The low VAT is deliberately kept since it can limit the burden of the consumers. However, not everything will be under VAT and so living a life in UAE with items/things that have no VAT can have no significant change in your daily lifestyle. There will also be Tax levied on businesses and so in overall terms, there will be an increase in the total cost of the consumer.
It’s effect on residents?Since most of the items will be covered under VAT, there will be an increase in the cost of living. However, the extent of increase is obviously in the hands of the consumer. The higher the consumption, the higher the tax. However, the good news is that not every housing/rental space will have VAT and so opting for something that is not under tax will be effective in saving up. There will also not be any VAT on essential items(day to day consumption)( the law is yet to be passed stating the items) so daily consumption will not have a significant change. However, the luxury good and airline tickets will have VAT levied on them, so if you are planning to go on a higher-end shopping spree/ travel from Dubai, expect to shell out some more money on VAT.
It’s effect on tourists?Tourists in Dubai will also have to pay VAT. on almost everything, from the goods they buy to the tickets the book everything will have a bit higher cost due to VAT. But there is nothing to worry because the VAT rate is as less as 5% and so your cost will not shoot up as you expect it to!
How is it going to effect the country as a whole?The sole purpose of introducing VAT in a tax-free economy like UAE is to reduce the dependence on revenues from oil and to provide with better public services in future. So there will be a strengthening of the economy and it is a good sign of a maturing economy. It’s exact effect on the country is not predicted yet, because only time will tell, but we know this for sure that it will aid in a much faster growth of the economy of UAE.
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