Illustration by Shenuka Corea

VAT Follow-up

The effects of the UAE's first Value Added Tax on goods and services.

Feb 4, 2018

On Jan. 1, the UAE government implemented its first Value Added Tax of 5 percent on all goods and services following the Federal Decree-Law No. 8 of 2017. This policy has been adopted in coordination with other Gulf Cooperation Countries with the aim to develop the region in a collaborative manner. As a result, all member countries are expected to implement the same policy between Jan. 1, 2018 and Jan 1, 2019.
The implementation of the 5 percent tax reflects the aim of the UAE’s Ministry of Finance to diversify the sources of public revenue and to reduce the government’s future dependence on oil and other hydrocarbons as the sole source of income. As small as the tax rate seems, Christine Lagarde, Managing Director of the International Monetary Fund in Dubai, believes that even a single-digit VAT rate could generate returns of two percent of the Gross Domestic Product.
The revenue, however, comes at the cost of a slight increase in living expenses for citizens and residents of the UAE, adding to the previously introduced excise tax on tobacco and carbonated drinks.
According to the VAT Treatment on Selected Industries document issued by the UAE’s Federal Tax Authority, not all goods and services would be subject to taxation. Selected services within each industry, including education and health care, will be exempt.
The UAE’s VAT is comparatively lower than in other countries. According to the United States Council for International Business, the VAT in the United Kingdom is 20 percent and 24 percent in Finland.
All products and services sold at NYU Abu Dhabi are VAT-inclusive. Consequently, the five percent tax rate is reflected prices in the East and West Campus Dining Halls as well as the Convenience Store. In order to accommodate this change in price, the value of meal swipes and allotted Campus Dirhams provided bi-weekly have increased: meal swipes have risen in value from 30 AED to 31.50 AED and Campus Dirhams installments have risen from 330 AED to 346 AED. Student stipends have remained the same.
Hind Ait Mout is News Editor. Email her at
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