Myths and misconceptions surrounding VAT

With the onset of the New Year, a five per cent levy on most goods and services was introduced in the UAE in the form of Value-Added Tax (VAT). While marketers took advantage of this opportunity to sell goods and services in abundance, customers had no idea that a product or service purchased in 2017, but delivered in 2018 was yet applicable to tax.

“Marketers used VAT as an essential tool to encourage unwanted purchases. The fine print details were not revealed, which have not only outraged the customers, but also shattered the trust of many loyal customers. The introduction of VAT was considered to be phenomenal, and the public was under pressure. Taking advantage of this, marketers tapped their profit margins,” said Mohammed Fathy, General Manager of Dubai-based consultancy, Al Dhaheri Jones & Clark.

Commencing January 1, 2018 a five per cent levy was imposed on most industries, including food and beverages, utility bills, private transport services, hotel services, entertainment, electronics, school uniforms, commercial rents, cars and jewellery, among others. However, education services will be exempt from VAT if run by a recognised institution and offers a recognised curriculum.

All six GCC countries agreed last year to introduce VAT, only the UAE and Saudi Arabia have said they will implement the new tax starting from January.