vat salary hike

There is hardly a week left for the new year to start and new additions to your finances i.e VAT. Everyone in UAE is aware of the VAT and the standard rate levied on the goods.

Even though 5% seems to be less, it will have a greater effect on your monthly expenses when added together. VAT is being levied on all sectors like groceries, electricity, water etc. There’ll be 5% VAT on every purchase and that can cost the UAE citizens a bit more. According to the latest update, there won’t be any hike in salaries.

Check: What will be taxed in UAE

Groceries, power supply, water, gas bills etc are something which will have a major part in the month to month costs and 5% on all the monthly costs can be a burden to the consumers. There was an expectation of an increase in the salary. Increase in the salary could be of some support to the consumers, but it was announced that there won’t be any hike on the basic salary of the employers as VAT is a consumption tax which means VAT is applicable on all the consumable goods and sectors. So VAT will have a definite impact on all the purchases. Consumers should be careful with the expenses hereafter. A standard VAT of 5% will be imposed on the movie tickets, dining, shopping, and related services. Already VAT is imposed on tobacco-based products and fizzy drinks and these products have a negative impact on the people’s health so imposing VAT will reduce the consumption. 

VAT will not be levied on few departments like hospitals, real estate sector if the property is residential, school fees, house rent, loans, ATM withdrawals, public transport like buses, trams, metro etc. House rent, school fees are the most expensive costs in UAE and exempting these from VAT is definitely a sigh of relief to the residents. Recently FTA(Federal Tax Authority) has opened job opportunities for tax accountants and tax accounting software vendors in UAE.  

Also Read: VAT affects on the education sector in Dubai

Still few experts suggest that hike in salary will have a greater impact in managing expenses. When 5% is added to each purchase and consumption, it will be more than what we expect. It is better to avoid unnecessary expenses and know how to save money ahead of the VAT.

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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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