UAE residents to pay 5% VAT on bottled water

VAT will also be levied on Dewa bills from January 2018.

The consumption of bottled water will also be subject to five percent value-added tax (VAT) from January 1, 2018.

Girish Chand, director, MCA Management Consultants, confirmed that VAT would be levied on bottled water as well as on the electricity and water bills.

The Dubai Electricity and Water Authority (Dewa) on Wednesday said that with effect from January 1, 2018, the residents' consumption bills willreflect five per cent VAT in compliance with the Value Added Tax (VAT) Law 8/2017 and its Executive Regulations.

However, VAT is not applicable in respect of housing fee, sewerage fee, and irrigation fee, collected by Dewa on behalf of Dubai Municipality. Knowledge fee and Innovation fee are also exempted from VAT, the utility said on its website.

The Federal Electricity and Water Authority (Fewa) in the UAE said VAT would also be levied on the consumers' bills, especially electricity bills, effective from January 1, 2018.

In addition, food items will also be subject to five per cent VAT. According to Euromonitor International figures, the UAE residents are expected to spend about Dh103.11 billion on F&B in 2017.

Analysts believe that VAT will not have a big impact on the cost of living in the country as the rate is one of the lowest in the world.

Among other countries around the globe, Denmark has placed VAT at25 per cent, Morocco at 20 per cent, Tunisia at 18 per cent, Algeria at 17 percent and Jordan at 16 per cent.

The introduction of VAT will help the UAE government to generate an estimated Dh12 billion worth of revenue in the first year, which will increase to Dh20 billion in 2019.

The UAE and Saudi Arabia will implement VAT from 7am on January 1 under the framework agreed among the GCC countries. While Oman and Kuwait have decided to postpone it till 2019.

The introduction of VAT will help the UAE government to generate an estimated Dh12 billion worth of revenue in the first year, which will increaseto Dh20 billion in 2019.

For More Information Please Contact Us HERE . 

No VAT on Dubai Metro, taxis in UAE

Where Careem and Uber are used as a taxi for passenger transport; the service will be exempt and no VAT would be chargeable.

Residents in the UAE, who rely on the public transportation system to get to work and move around, will not have to pay more for the use of public transportation after the implementation of the value added tax (VAT) from January 1.

Public transportation under the Executive Regulations Article45 are specifically exempt, which includes buses, taxis, and the metro.

As per Article 45, the following are exempt from the VAT: A motor vehicle, including a taxi, bus, railway train, tram, mono-rail or similar means of transport, designed or adapted for the transport of passengers; a ferry boat, abra or other similar vessel designed or adapted for the transport of passengers; a helicopter or airplane designed or adapted for the transport of passengers and approved for transport of passengers in accordance with Federal Law No. (20) of 1991 on Civil Aviation.

Jain, however, clarified that when the transportation's principal objective has to do with sightseeing, or the enjoyment of catering services, or other forms of pleasure or entertainment, the service will not be exempt from the VAT.

"Where Careem and Uber are used as a taxi for passengertransport; the service will be exempt and no VAT would be chargeable."

The President, His Highness Sheikh Khalifa bin Zayed Al Nahyan, has issued the Federal Decree-Law No. 8 of 2017 for Value-Added Tax, with one of the lowest rates in the world at five per cent.

For More Information Please Contact Us HERE. 

Get ready to pay 5% VAT on restaurant bills in UAE

The new tax will be imposed on dining out on all kinds of eateries including fast food outlets, Asian, Continental, Arabic and Chinese.

Dining out with family and friends is set to become more expensive from next week due to the implementation of value-added tax (VAT) in the UAE.

As part of the GCC agreement, the UAE will impose five per cent VAT on dining out from January 1, 2018.

The new tax will be imposed on dining out on all kinds of eateries including fast food outlets, Asian, Continental, Arabic, Chinese, and other restaurants.

According to KPMG's recent report, UAE residents spend on average between Dh50 and Dh150 per person on dining out.  The study revealed that 24 per cent of residents eat out lunch eight times a month and 23 per cent have dinner at restaurants. Around 94 per cent of UAE residents, according to a survey of 800, like to try new restaurants and/or new cuisines.

For More Information Please Contact Us HERE.

Is VAT applicable on mobile bills? UAE ministry clarifies

The tax will not be applied to the face value of the recharge

The Telecom Regulatory Authority of the UAE on Monday clarified that the residents using post-paid service will have to pay five per cent VAT on the total amount of the package they are using.

As for recharge cards, the tax will not be applied to the face value of the recharge; but on the prices of the services used by the user from the recharged amount.

This means that the consumer will not charged five per cent VAT when buying a Dh50 recharge card from a shopkeeper, but on the value of thecall he makes. For example, the consumers makes a one minute call of 30 fils, he will be charged 5 per cent VAT on that amount.

VAT will also be calculated at 5 per cent upon purchase of a new SIM after January 1, 2018.

In general, the final consumer is the one who bears the cost of this tax, while businesses - including telecom companies - collect andcalculate the tax, as a tax collector for the Federal Tax Authority.

As of January 1, 2018, price of services in the UAE's telecom sector will be inclusive of VAT. However, this will apply to telecom services to which VAT is not applicable pursuant to Federal Law No. 8 of 2017 on ValueAdded Tax and its Executive Order - for example international roaming services, TRA said.

For More Information Please Contact Us HERE . 

Plan your purchases before VAT

Making a budget for your day to day expense is highly recommended

Weekly, sometimes even daily, groceries can easily total up to a few hundred dirhams in the UAE, especially if it's for a large family. Food items, toiletries, household items, credit recharge cards and beauty products - all of these necessary products require lots of space in a family's budget plan.

Although, how will an average family's monthly budget for everyday products be impacted once the 5 per cent VAT (Value Added Tax) would be implemented starting January 1, 2018? Basic items such as bread, milk, eggs andeven mineral water are not exempted from the tax.

Some main everyday items that will be taxed, how it will affect a family's budget and how they can reduce the impact.

Low-income households can be hit hard from the tax.

It is common for many countries across the world to exempt some basic food items and groceries from VAT. Luxury items such as jewellery and cars are usually subject to a VAT increase. Grocery items - basic fooditems such as bread, milk and water will be charged at 5 per cent VAT in theUAE. This will have a great impact on the low-paid households, for example taxi drivers, construction workers, restaurant staff, beauticians and cleaning staff.

Families and individuals are recommended to do a bulk shop of non-perishable items before December 31 before the VAT increase starts to lower the impact.

VAT in UAE: Will middle class feel taxed?

Children's clothes will also be charged a 5per cent VAT. This will have a greater impact on larger families in the UAE including higher paid expats. Many low-paid employees have come to work in the UAE without their families, therefore the impact of this will be very low. Expats can pack clothes for their children when they are coming to the UAE and bring larger children's clothes to replace them when they have their annual holiday each year.

Your handy guide to VAT in UAE: What will change and what won't?

Encouraging families to ensure that they are keeping track of their everyday spending and have a proper budget in place.

People may become a bit selective in their day to day grocery at the start but will be habitual of VAT in a just couple of months. Everyone is in fear of paying 5 per cent VAT. However, it's a slim increase and may not hit people that much as they are getting afraid of it. Making a budget for your day to day expense is highly recommended. Do not buy promotional stock which is not your real necessity. In short, spend on what you really need.

Petrol will also be charged 5 percent VAT, as well as cars.

Most car dealers increased their prices about a year ago when VAT was first being introduced. Consumers may be pleasantly surprised as car dealers may drop their prices by 5 per cent in the New Year and then add on the 5 per cent VAT, which will in effect appear that there is no VAT impact," she said.

Petrol from the pump will be charged at 5 per cent. This is in line with other countries around the world. The UAE benefit from lower fuel prices than many other countries and therefore the effect may not be so great for western expats.

To summarize, families should purchase non-perishable items before December 31 where possible. Children's clothes can be purchased from their home country and can be passed down to siblings and younger family members. There is no need for expats to fly back to their home country for medical and dental services. And there is no rush to buy a car before 2018.

Fore More Information Please Contact Us HERE.  

No VAT on withdrawals from other banks' ATMs in UAE.

The VAT will be payable only on the fee charged by the banks, which is a nominal amount of Dh2 per transaction.

While many residents in the UAE are struggling to understand howthe value added tax (VAT) will impact the way they interact with their banks, experts say that there is no reason to be alarmed.

Customers will not be charged five per cent VAT on the amount withdrawn from ATMs other than their own bank, rather only on the Dh2 fee charged by the banks, according to tax experts. The five per cent VAT will be levied on the Dh2 fee charged by banks when withdrawing from ATMs of other banks - which translates to around a nominal 10 fils per transaction.

"When you withdraw from your account, there is no transaction, so VAT does not apply in such case," says Nirav Shah, director, Fame Advisory.

The VAT will be payable only on the fee charged by the banks, which is a nominal amount of Dh2 per transaction in general; so after applying five per cent VAT, it will become Dh2.10 from January 1, 2018, onwards. In essence, it does not hit customers' pockets because even if you do 50 such transactions in a month, your total cost is going to rise maximum by Dh5.

Experts have noted that banks will have to absorb most of the VAT charged on them by their vendors and suppliers, because the consumption tax on the majority of their output is exempt, so they cannot recover input VAT they pay to their vendors for various goods and services procured by them.

The UAE will implement five per cent VAT on certain goods and services from January, 2018, as part of the GCC-wide agreement. Saudi Arabia is the only other Gulf country to join UAE in implementing VAT.

VAT poses challenges for family-run businesses in GCC

Every family office operating in the GCC will be affected by VAT     

Family-run businesses in the GCC face significant challenges and need to assess their strategy carefully regardless of the industry segment they operate in when value added tax regime comes into force, tax experts said.

The increased compliance requirements mean that family-run businesses would need to decide which department would be responsible for VAT and related compliance.

It may be the right moment to assess the duties and responsibilities of a family office in this regard, if already in place, or assess the feasibility of the set-up of a family office as part of the family's wealth strategy.

The impact of VAT on family-run businesses, the various opportunities and challenges that businesses may face, and how best to tackle these obstacles to be prepared for VAT implementation are being discussed by so many experts. 

In order to ensure VAT readiness, family-run businesses in the GCC need to conduct acomprehensive VAT impact assessment of the operations, goods and service flows, identifying and segregating business and family related expenses, and defining the scope of the required VAT and organisational structure and resources.

It is vital for family businesses operating in the GCC to raise awareness across the entire organisation, educating all employees about the implications of VAT and potential penalties in the case ofnon-compliance.

Ismael Hajjar, Mena Private Client Services Leader, noted that it is an ideal time for GCC family businesses to reconsider their approach to ownership structures and family governance along with conducting VAT assessment analyses.

In fact, reviewing the legal structures and considering efficient tools to streamline the family wealth with business investments are important prerequisites for a successful VAT implementation. Ignoring such measures may result in significant costs and inefficiencies.

A study by Deloitte said family-owned offices, importers/exporters, and technology, media and telecom   firms would be impacted in various ways, therefore, they need to ensure that they're prepared for VAT ahead of its implementation from next year.

Every family office operating in the GCC will be affected byVAT because anything purchased in the GCC is likely to be subject to VAT. In addition, family offices will inevitably be dealing with VAT registered businesses as suppliers, or advisers to the family, and they will need to ensure that the VAT is treated correctly," said the study.

For More Information Please Contact Us HERE. 

No plans to delay VAT in UAE for businesses

The social impact expected VAT will vary from person to person" but will not exceed 1.4%annually

There are no plans to delay VAT for businesses or banks in the UAE and no company will be exempted or will be given an extension for applying, the Minister of State for Financial Affairs announced on Tuesday.

"The date is set for levying VAT from January 1, 2018, and the government is ready for VAT," minister Obaid Humaid Al Tayer said during a session of the Federal National Council (FNC), held in its headquarters. During the session chaired by FNC Speaker Dr Amal Al Qubaisi, council members raised concerns over the readiness of businesses for VAT, and the impact of VAT on the overall national economy to the minister.

"The imposition of value added tax is a historic step forward," said the minister, adding that it is a step forward towards achieving "financial stability".

However, a statement by the Chairman of UAE Banks Federation, Abdul Aziz Abdulla Al Ghurair, revealed the concerns that banks in the UAE had over the VAT, highlighting that banks are not ready and require a six-month extension.

"The government does not like to postpone anything, so it's impossible to exempt anyone from the tax. There will not be any favours given to anyone," said the minister.

The minister said businesses and banks have been informed about the VAT since the GCC signed the VAT agreement back in December 2015.

"There is no surprise that we are implementing the VAT."

Moreover, he said the VAT will have "a minor impact" on consumers as well as investors in the UAE.

He noted the social impact expected from its application "varies from person to person," but will not exceed 1.4 per cent annually.

"If an individual would spend Dh5,000 a month, they will be affected only by Dh70."

Al Tayer pointed out that VAT will impact the GDP by 0.42 per cent in the first year, but will go down to 0.11 per cent in the medium term, and will continue to shrink as the economy grows.

He also said the impact of VAT on investments is very limited and will not exceed 0.68 per cent.

He stressed that the implementation of tax is part of the diversification of the state revenues, adding that it aims to reach financial stability and is part of the government plan to diversity its source of income.

"We conducted three studies to measure the impact of this tax on society over 10 years through specialized international companies in 2007, 2010 and 2015, and the implications for 2016," said the minister.

Regarding the impact on VAT on small and medium-sized businesses, he said these entities must now study their accounts and regulate their work more often.

"We should look at this from a positive view point, because companies will now be more in the clear."

However, when FNC member Hamad Al Rahoomi asked Al Tayer about the number of businesses already registered with VAT, the minister did not have an answer.

Meanwhile, on the sidelines of the FNC session, the minister was asked about the concerns being faced by businesses regarding the smoothness of the VAT process. "The answer is already out there," said Al Tayer. He pointed out that the government is ready for VAT and when asked about the readiness of businesses across the country, he said: "The responsibility is in their own hands."

Also during Tuesday's session, the council passed the draft law for the 2018 budget, which totals up to Dh51.4 billion.

For More Inforamation Please Contact Us HERE. 

Healthcare sector largely spared from 5% VAT in 

UAE

VAT will not be charged from patients for treatment, medicine costs and surgeries.

The healthcare sector has been largely relieved from value-added tax (VAT) in the UAE.

According to the Federal Tax Authority, preventive healthcare services, including vaccinations, treatment of humans such as medical and dental services, have been spared from the five per cent VAT - which will come into effect from January 1, 2018. Cosmetics treatment will be subject to fiveper cent VAT.

Healthcare which is not related to preventive or treatment will be subject to five per cent VAT. But the following healthcare services related to well-being of human beings are zero-rated: Preventive healthcare including vaccinations; treatment-related services including medical services and dental; pharmaceutical products and medical equipment identified by the Cabinet decision.

Under the regulations, VAT will not be charged from patients for treatment, medicine costs and surgeries directly related to the health of the residents.

Srinivas Achar, chief financial officer, National Hospital, said VAT will not be applicable when it is for the well-being provided by hospitals, doctors and pharmacies.

In terms of readiness of the companies, some companies are ready while others are not.

According to Alpen Capital's GCC Healthcare Industry report, theUAE healthcare market is projected to reach Dh71.56 billion by 2020.

For More Information Please Contact Us HERE . 

UAE residents to pay VAT on electricity, water bills.

According to estimates, VAT is set to raise the costof living by about 2.5 per cent.

Residents in the UAE will soon have to watch how much energy they consume as their electricity and water bills will be subject to the value added tax (VAT) being introduced from next year.

Starting from January 1, 2018, water and electricity bills in the UAE will be subject to five per cent VAT. According to estimates, VAT is set to raise the cost of living byabout 2.5 per cent.

According to the executive regulations, which have been approved by the UAE Cabinet, water and electricity are considered supplied goods.

"A supply of water and all forms of energy including electricity and gas. whether used for lighting, or heating, or cooling, or air conditioning or any other purposes," the official article under 'supplies of goods' states.

Many experts note that the announcement is not out of the blue as several countries with consumption taxes have a segment on energy and utilities services. Girish Chand, director, MCA Management Consultants, said that both Saudi and the UAE authorities have brought these categories under the VAT.

It has been clear that when we talk about power and water, there's no specific exemption or zero rating.

As part of the GCC-wide agreement, the UAE and Saudi Arabia will be the first countries to implement VAT while the other countries will follow.

For More Information Please Contact Us HERE 

VAT in UAE: Du reveals details of charges for customers

5 per cent levy will come into effect on January 1, 2018

Du is encouraging its business customers to register with the Federal Tax Authority and submit their Tax Registration Number at the earliest.

Emirates Integrated Telecommunications Company (Du) has announced details of how VAT will be applied to its products and services when it comes into effect on January 1.

For postpaid customers, 5 per cent VAT will be reflected on their total monthly bill, while prepaid customers will continue to recharge as normal with More Time, More International and More Credit.

The company added in a statement that VAT will apply on the usage of their credit towards Du services with the exception of More Data where the credit received will be after the 5 per cent VAT deduction.

Du customers, as well as those of Etisalat, had been sent messages in recent weeks notifying them that the 5 per cent tax would be added at the beginning of next month.

Etisalat said that “most” of its products and services would be subject to the rate hike in compliance with federal laws and regulations “levying and regulating the tax in the UAE”.

Fahad Al Hassawi, deputy chief executive, Emirates Integrated Telecommunications Company, said: “We are taking all necessary measures to educate our customers so that they are fully aware of the government directives regarding VAT and the way that it will impact their telecommunicationsspend."

“The introduction of VAT is a step forward towards a greater future for the UAE, and we want to ensure our customers are aware of their contribution towards this.”

For More Information Please Contact Us HERE. 

Guide: How VAT will impact education sector in UAE

Implemented across more than 150 countries worldwide, the UAE's 5% VAT is among the lowest in the world

1. What is the VATtreatment of education?

The main educational services and related goods and services supplied shall be zero rated, if supplied by any of the following 'qualifying educational institutions':

·            Nurseries, preschools and schools

·           Higher educational institutions owned or funded by federal or local government.

This means that a 'qualifying educational institution' shall not charge VAT on the zero rated educational services they provide, and will be able to recover the VAT they pay on related costs when they file their tax returns.
Any educational services provided by other entities not listed above shall be subject to the standard rate (i.e. 5%).

2. Does a 'qualifying educational institutions' have to register for VAT?

Provision of educational services by a 'qualifying educational institutions' is a zero-rated taxable supply. Hence, if the supplies exceed the mandatory registration threshold of Dh 375,000, then the institution needs to register.

It may apply for exceptions from registration via the registration application if the institution does not provide any services or goods taxed at the standard rate of 5%.  Applying for an exception will relieve the school from filing regular returns, but would also mean the school cannot recover the input tax incurred on its expenses.

3. Can anybody supply zero-rated education?

No. Only 'qualifying educational institutions' can provide zero-rated supplies.   'Qualifying educational institutions' are those educational entities recognized by the federal or local competent government entity regulating the education sector where the course is delivered, and in the case of higher education institutions, they are either owned by the federal or local government or receive more than 50% of their annual funding directly from the federal or local government.

That means that education provided by all other educational entities does not qualify for zero-rating and such institutions must charge standard-rate VAT on their supplies of education.

4. Is all education supplied by education institutions zero-rated?

Only educational services which are provided in accordance with the curriculum recognized by the federal or local competent government entity regulating the education sector where the course is delivered can be zero-rated.  If an educational entity supplies education that is not in accordance with a recognized curriculum, it must charge VAT at the standard rate (i.e. 5%) on those supplies.  In a limited number of cases, an educational institution may provide educational services to students free of charge and the education is wholly funded by government grants. Provided the conditions for zero-rating are still met i.e. it is a recognized curriculum supplied by an educational institution, then the grant income can be treated as a zero-rated.

5. What about related goods and services?

If a 'qualifying educational institution' supplies other goods and services that are directly related to a zero-rated supply of education, they qualify for zero-rating as well. For example, books and digital reading material supplied by educational institutions that are related to the curriculum being taught also qualify for zero-rating.

6. Are there any exceptions to zero-rating?

Yes. There are supplies related to the provision of the education services which are subject to the standard rate (i.e. 5%), such as:

a.    Goods and services supplied by a 'qualifying educational institution' to persons who are not enrolled in it;
b.    Any goods, other than educational materials provided by a 'qualifying educational institution', that are consumed or transformed by the students being taught by it;
c.    Uniforms or any other clothing which are required to be worn by a 'qualifying educational institution', irrespective of whether or not they are supplied by such institution as part of the supply of educational services.
d.    Electronic devices used in educational services, irrespective of whether or not supplied by a 'qualifying educational institution' as part of the supply of educational services.
e.    Food and beverages supplied at a 'qualifying educational institution' including supplies from vending machines or vouchers in respect of food and beverages.
f.    Field trips, unless these are directly related to the curriculum of an education service and are not predominantly recreational.
g.    Extracurricular activities provided by or through a 'qualifying educational institution' for a fee additional to the fee for the education service.
h.    A supply of membership in a student organization.
A 'qualifying educational institution' must charge and account for VAT on its charges for each of the above items.

Another exception to zero rating is the provision of school transportation, which falls under "domestic transportation" and hence is exempt.

7. What is the VAT treatment of student accommodation?

Student accommodation is included within the definition of residential accommodation, therefore the supply of student accommodation (other than the first supply of a new residential building) will be exempt from VAT.  Educational institutions which also supply accommodation to students will be unable to recover VAT incurred on costs which directly relate to the provision of the accommodation.
 
8. What about grant income or sponsorship received?

In some cases, educational institutions may receive grant income or sponsorship from the government or third parties. The VAT treatment of grant/sponsorship income depends on whether you are providing the donor with a benefit in return for the funding received. Where a benefit is provided, you are likely to be making a taxable supply of services for VAT purposes and should account for the VAT onthe income received.  A benefit could include e.g. naming an event after a sponsor, giving free of charge or reduced price tickets in return for the sponsorship, displaying the sponsors logo in a predominant place on flyers etc. However, where there is no significant benefit received, the income will be treated as outside the scope of VAT.

9. Is grant funded research subject to VAT?

Again, the VAT treatment of grant income received to fund research depends on the extent of the benefit provided to the funder of the research. Where the educational institution is required to provide certain deliverable in return for the funding and is required to provide the intellectual property and other products of the research to the funder then this will be a supply of research services and subject to VAT at 5%.  However, where the funder does not receive anything in return for the funding other than incidental information e.g. progress updates, records of expenses, evidence that the research has been conducted as requested, then this is will not be considered to be a supply of services by the educational institution and the grant income received will be outside the scope of VAT. VAT incurred on costs which are linked to an outside the scope supply and not linked to a taxable supply made by the business should not be recoverable as an overhead cost of the business in line with the business' input tax apportionment percentage.

Fore More Information Please Contact Us HERE