VAT in UAE : How Will It Affect you?

VAT  in UAE : How Will It Affect you?

There’s been talk of it for a while, but it has now been made official, VAT is going to be introduced in the UAE (five per cent, exempt on 150 food items, education and healthcare) at the beginning of 2018. But what exactly is VAT, why is it being introduced and what does it mean for you?

The news that VAT (Value-Added Tax) will be arriving on our doorstep in two years was met with mixed emotions. While those ‘in the know’ have said its introduction was inevitable and a step in the right direction for the country’s economy (we’ll get to that), most of us girls have probably said something along the lines of ‘VAT, what? Does that mean the price of shopping will go up?’ Unfortunately, the answer is yes. But the good news is, only by a tiny, tiny, little bit.

VAT is considered world-wide to be one of the healthiest forms of taxation and has been adopted by most leading economies of the world. Currently, it’s in use in more than 140 nations, after first being introduced in France 52 years ago. The GCC countries are yet to finalise the full details of how it will work here, but according to the UAE’s Ministry of Finance, the VAT set for us is likely to range between three t0 five per cent. That rate is among the lowest in the world and to help to put it into a bit of perspective, the standard VAT rate in the UK is 20 per cent. Yes, 20! Comparisons like that make it easier to understand the impact the introduction of the system will have on the prices we pay for things. An increase of no more than five per cent will be negligible and won’t really affect most of us that badly. In fact, some of us might not even notice it at all.

Even when it does arrive though, VAT isn’t going to be added to everything. The GCC countries have all agreed to exempt staple food items (a total of 94 items have been identified), along with healthcare, education and social services.