All food, water and electricity bills will be subject to the 5 per cent tax.

It was announced almost a year ago that the UAE will be getting Value Added Tax from 2018.

The 5 per cent tax on goods and services—which is one of the lowest rates in the world—is set to be introduced in January, and is expected to boost the UAE’s economy by Dhs12 billion in the first year alone.

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And we’ve just got a little more clarification on which items will fall under it.


All types of food, including staples like bread and rice, will be subject to VAT, Gulf News reports, despite previous suggestions that certain essential food items would be exempt.

“The law in the GCC agreement said that any food items would be under the sovereign right of the government to include it [as a zero-rated item]. The law that has been issued did not include it,” Khalid Al Bustani, director-general of the Federal Tax Authority, told the newspaper.

Water and electricity bills will also be subject to VAT, The National reports, as they are considered supplied goods.

Tourists to the UAE, however, are expected to be able to claim back the 5 per cent tax on purchases made during their visit.

There are also still some exemptions for residents, as HH Sheikh Khalifa bin Zayed Al Nahyan, President of the UAE, outlined back in August. In good news for parents, there’ll be no tax added to tuition fees for nurseries, schools and higher educational institutions owned or funded by the government.

(It costs an average of Dhs500,000 to put a child through school in the UAE, so that exemption will be very welcomed by families). Healthcare services, such as doctor’s fees, will also be excluded from VAT, as will the supply or import of “investment precious metals”.

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And, keen travellers, you’ll be happy to hear international air fares will also be exempt from the 5 per cent tax. The law also states that residential buildings leased or sold will be exempt, as will local passenger transport.

VAT will be rolled out across the GCC between January 2018 and January 2019, and will be added onto advertised prices rather than checkouts in the UAE.

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