When was VAT introduced in UAE?

VAT started on 1 January 2018 at 5% rate.

Which items are exempt from VAT?

Rent, education, healthcare, and basic food are exempt.

How does VAT affect cost of living?

It increases costs slightly depending on spending habits.

Are utilities taxed under VAT?

Yes, water and electricity have 5% VAT.

Can I lower VAT impact?

Yes, by spending on exempt items and making monthly budgets.

VAT in UAE: Effects on Common Man 🥇

VAT in UAE: Effects on Common Man

The UAE ended its tax-free era on 31 December 2017 with the launch of Value Added Tax (VAT). Starting from 1 January 2018, a 5% VAT was applied to certain goods and services. This small tax still affects cost of living in the UAE. The main benefit of VAT is more revenue for the government to improve public services.

VAT Categories in UAE

VAT divides goods and services into three main groups:

VAT Exempt: Health sector, education, basic food, rent, local transport, first-time property buyers, residential leases, land buyers.
Zero Percent VAT: Export goods, international services, precious metals, some education and health services, new residential property within 3 years.
Five Percent VAT: Electronics, clothes, food, fuel, communication, entertainment.

How VAT Affects Common People

VAT effect depends on lifestyle. Spending more on taxed goods raises cost of living. Spending on exempted goods keeps budget low. Wise planning helps control expenses.

Sectors Most Affected by VAT

High-end goods and electronics.
Luxury cars and jewelry.
Eating out and entertainment.
Financial services like bank charges.
Tourism and leisure activities.

Example: A phone of AED 3000 costs AED 150 more due to VAT.

Sectors Exempt from VAT

Rent, healthcare, education, and 94 basic food items are VAT free. Government-funded schools and universities are exempt. Some school items like uniforms, books, and bus fares are taxable.

VAT and Price Changes

VAT raises some prices but keeps rent free from tax. Utilities like water and electricity cost 5% more. Buying a car costs extra due to VAT on registration, license, and insurance. Public transport and international flights remain tax-free. Dining out becomes costlier, but careful planning reduces the impact.

Why Choose Mubarak Al Ketbi (MAK) Auditing

VAT increases living costs but smart planning helps control it. Make a budget and spend wisely. A 5% tax won’t hurt much if you avoid unnecessary expenses. Mubarak Al Ketbi (MAK) Auditing can help you understand VAT and guide you.

What Can Help – Mubarak Al Ketbi (MAK) Auditing

Mubarak Al Ketbi (MAK) Auditing offers VAT consultation, accounting, and tax services. We help businesses stay compliant and reduce risk. As the saying goes, every cloud has a silver lining.

For more information visit our office: Saraya Avenue Building – Office M-06, Block/A, Al Garhoud – Dubai – United Arab Emirates
Or contact/WhatsApp us: +971 50 276 2132