UAE residents to pay VAT on food, water, power

Water, food and electricity bills in the UAE will be subject to the 5 percent value-added tax from January 1, 2018.

With 35 business days left until the implementation of value added tax in the UAE, final details have emerged about which goods and services will be subject to the levy and which will be zero-rated and exempt.

The value-added tax, known in some countries as goods and services tax, or GST, is a consumption levy imposed on a product at each stage of production, before the final sale.

A 5 percent VAT is set to come into force in the UAE and Saudi Arabia on January 1 with the rest of the GCC following by the beginning of the following year. In the UAE, VAT could generate Dh12 billion in its first year and Dh20bn in its second year, according to Sultan Al Mansouri, the Minister of Economy.According to the executive regulation which has been approved by the UAE Cabinet and will be issued soon, water and electricity are considered supplied goods.In article 2, headed “Supplies of goods”, it says: “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.”

VAT on Education 

Under the VAT regulation, higher education institutes which are more than 50 percent funded by the government, will not be charged VAT but the rest will be. 

Khalid Al Bustani, director general of Federal Tax Authority, on Wednesday said the tourists in the UAE will also get refunds on the returns. He said the authority is working with the parties involved in the project and expected to be rolled out ahead of VAT implementation.

However following services shall be taxable at 5 percent even though provided by recognized educational institutions:

1. Goods & services supplied to persons who are not enrolled in the institute.

2. Any goods other than educational material provided which are not related to the curriculum of the educational institute.

3. Supply of School Uniforms as required by the educational institute.

4. Providing electronic devices irrespective of whether or not supplied as a part of educational services.

5. Foods & Beverages supplied at the educational institutions

6. Excursions or field trips unless directly related to the curriculum of the educational services.

7. Extracurricular activities provided by or through the educational institutions.

8. Supply of membership in a student organization.