VAT stands for Value Added Tax, which is otherwise known as Goods and Services Tax(GST). The inclusion of VAT means you need to pay some extra amount as tax on various items and/or services you purchase. This is the most progressive way of taxing expenditure rather than business.

VAT in Dubai:

There are many countries in this world which are tax-free and the United Arab Emirates was one among those Tax-free nations. However, UAE is all set to change the trend and will no longer be a Tax-Free nation. This VAT will be levied on multiple goods and services, effective Jan 1, 2018.

The cost of living in UAE is already high and this is going to increase the expenditure slightly. The tax which is paid will be collected by the government and used for the development of free public services like Government hospitals, parks, gardens etc. This is applicable to everyone in UAE. Expats, UAE Nationals, tourists etc; everyone has to pay the tax. This would be automatically included in the bill of your purchase. 

VAT on firms: 

The government of UAE has decided to add 5% tax to every purchase be it entertainment, electricity bills, Electronics, tobacco, beverages etc. As a recent update, few sectors have been exempted from adding tax. Hospitals, Schools and few items in the grocery will not be included in the VAT. Real Estate is one of the successful business in Dubai is also free from tax.

Dubai being a gold hub is now going to include tax. More than half of the tourists don’t leave Dubai without buying gold tax-free and for lower prices. So far sectors like local transport, Life insurance are going to be tax-free.

Also Read: VAT affects on the Education sector in UAE 

Income Tax in Dubai:

Even though UAE government will impose VAT on the bills, there will be no Income Tax to be paid annually like most of the countries. UAE would still be a tax-free nation in this case where people need not pay for their income which is nothing but Income Tax. However, Corporate Income Tax of 55% needs to be paid which excludes Oil and Natural gas companies.

Registration of Entities: 

If you are self-employed then you need to register your business and add VAT to your products. The registrations for the same are going to begin from October 2017 mostly and it will be open until Jan 2018. The government of UAE is yet to decide which firms have to register and the registration fees accordingly. Right now most of the firms are yet to be decided about VAT inclusion. 

Maybe interested: FTA opens registrations for tax agents and tax accounting software agents in UAE 

This VAT is going to be useful for the development of the Emirates Nation. The government of UAE is planning to use it wisely keeping future in the mind and growth of the country accordingly. However, people in UAE have to be prepared for extra charges which are going to be applicable from 2018, Jan 1. Everyone should plan their expenses from now itself and spend accordingly.

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Nikitha is a Senior Analyst at She has been writing about personal finance, credit cards, mortgage, and other personal finance products in the UAE. Her work on Mortgage loans has been featured by the GulfNews and other popular Financial Blogs in the UAE.

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