1st January 2018 will witness the implementation of Value Added Tax (VAT) law in UAE which was a topic of discussion within the companies and individuals since last one year. The implementation of VAT will provide a new source of income to the UAE Government which they will be contributing to improve the services to public. The VAT shall be made applicable on all the import and / or supply of goods and / or services at every stage of production, distribution, at a rate equal to or less than 5%.
As per the VAT law, published by the government, the VAT will not be charged on the following categories:
1. Exports of Goods and Services to outside GCC;
2. International Transportation, and related supplies;
3. Supplies of certain sea, air and land means of transportation (such as aircrafts and ships);
4. Newly constructed residential properties, that are supplied for the first time within 3 years of their construction;
IMPACT OF VAT ON DIFFERENT SECTORS:
1. EDUCATION:
No VAT shall be imposed on the Private and Public School education (excluding higher education) and related goods and services provided by such educational institutions, higher education provided by any institution owned by Government and / or 50% funded by government; after school activities supplied by the teachers and school trips where is the actual purpose is educational and within the curriculum. All the above mentioned categories are exempted from VAT.
However, the education provided by private higher educational institutions, School uniforms, related stationeries, electronic equipments like tablets, laptops etc; school trips of recreation and not within the curriculum shall impose VAT at the rate of 5%.
2. MEDICAL & HEALTHCARE
Though basic healthcare and related services including but not limited to Dental Services, Vaccinations etc will not attract VAT, the medical insurance products like Medicines, Medical equipments will not be exempted. Hence the VAT shall be payable on annual premiums.
3. TRANSPORTATION:
Although VAT will be added to the price of petrol, the supply of local passenger transport, such as taxis, buses and the metro will be zero-rated, and consumers will not be affected. International transport, whether by air, sea or road, will also be free of VAT, though with the cost of the supply of these services set to increase in many circumstances, this will no doubt be passed on to the consumer in the way of price increases.
4. TELECOMMUNICATION :
The VAT shall also be made applicable to the telecom service providers in UAE. Starting from January 2018, most of the telecom services shall be subject to 5% VAT in compliance with the Federal laws and regulations.
With the introduction of VAT from January 2018 and the imposition of Excise tax from October, 2017, the Country is considering to impose new taxes in the future in order to increase its revenue and thereby making them less dependent on the revenue from the production and export of Crude Oil, which played a huge role in increasing the Government revenue.