2018 is less than a month away, and VAT era in the UAE is almost upon us. Overall, UAE residents can foresee their cost of living go up starting January 1, 2018. However, the actual monetary impact of VAT will vary in keeping with individuals’ lifestyle choices and spending patterns.
We try to answer some of the most commonly asked questions about the implementation of VAT, and which products and services are exempt from it.
Will property rent be taxed?
As a general rule, lease of residential properties will be exempt from VAT. But if you’re planning to rent a commercial property, be prepared to pay VAT at the standard rate of 5 percent.
Will VAT be applicable on bank fees and services?
Bank fees are going to be taxable under VAT, unless otherwise specified. You can expect bank service charges to go up under the new tax regime. Here’s a good example:
The amount you withdraw from your bank account, be it from an ATM of your own bank or another bank, is not taxable under VAT. However, the transaction fee charged when you withdraw from an ATM of another bank will be taxable. This transaction fee is a standard Dh2 across the UAE as of now, and you can expect it to go up to a nominal Dh2.1 with 5 percent VAT starting January 1, 2018.
Will insurance premiums be taxed?
Expect insurance premiums on non-life insurance (health, motor, travel and such) to go up with the introduction of VAT. However, it is understood that life insurance will be exempt from VAT.
Will utilities be taxed?
Your DEWA (or SEWA/ADWEA) bills will go up by 5 percent in 2018. It is confirmed that electricity and water will be subject to being taxed under VAT. Now is a good time to think of smart ways to cut those energy costs at home!
Will telecom services be taxed?
Du and Etisalat have both confirmed that all their products and services will taxable at 5 percent under the new VAT regulations. So, if you were paying Dh200 per month for a post-paid mobile bundle, you will now see that monthly expense go up to Dh210.
Will school fees be taxed?
Based on what’s understood of the new VAT regulations, the private education sector will most likely be zero-rated and hence, tax-free for the general public. So while school tuition fees will be exempt from VAT, parents must be prepared to pay 5 percent extra on items like school transport and uniforms under VAT.
Will healthcare be taxed?
Medical treatments and services, barring cosmetic treatments will be zero-rated and not taxed under VAT. This will ensure that you won’t have to pay any additional tax on basic and preventive healthcare.
Will public transport be taxed?
Local public transport will not be subject to VAT. So, RTA taxis and Dubai Metro services will be exempt from taxation. Not only that, international air travel to and from the UAE will also be exempt from VAT.