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VAT in UAE: What will be taxed and exempted

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VAT in UAE: What will be taxed and exempted

November 21,2017 Invista Homes 0comments

School fees will be spared, but residents should keep an eye on their budgets as water, power, food and jewellery are expected to come under Value Added Tax (VAT)  from next year. Experts, however, believe that it won’t break the bank for most people.

“Most food staples have a price elasticity of demand ranging from 0.20 to 0.80 in demand. This means that staple food items are generally price inelastic. So when you regularly purchase an item for Dh20 and now see it priced at Dh21, it is unlikely that consumers will think twice about buying it especially considering that the bulk of food items in the UAE are imported and prices fluctuate regularly,” says Dr Sanjay Modak, Visiting Professor of Economics at the Rochester Institute of Technology. He says it is important to go the European way and include the VAT in the price you see on the shelves and not add it at checkout as it’s done in the US.

A VAT rate of 5% for food is still low compared to other countries. In Europe, rates range from 15% in Luxembourg to 25% in Croatia. Japan has a consumption tax of 5% and Singapore has a GST of 7%. Canada has  5%. Hong Kong still remains tax free for all consumption.

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