By now, you, as well as the almost a million Filipino expatriates in the UAE, would have probably heard about the 5% value added tax will be implemented across the six states in the Gulf Cooperation Council (GCC) starting 2018. But before you get concerned about this change, it is best to understand what prompted this decision and how it will play in the overall development in the region.
The GCC have agreed on the implementation of this new rule that is expected to bring in a total of Dh91.8 billion additional revenue for the region and Dh12 billion in tax proceeds every year for the UAE. In hindsight, this is the step in the right direction regarding diversifying the region’s source of financial resources which would be used in various projects being developed for the people.
While the roll out is still almost a year away, The Filipino Times brings in some of the basic information with regard to which commodities the VAT will be applied to that every OFW living in the region needs to know.
Basic Commodities:
Arguably one of the most important regular purchases of everybody, OFWs should know that not everything that will be bought in the supermarket will be subjected to VAT. Around 94 food products have already been confirmed to be exempted from the additional 5% charge.
Likewise, medical and school bills are not tipped to be affected by the change unless an increase in price happens organically within the industry.
Non-essentials:
Things like clothes and electronic devices including home appliances are expected to be susceptible to VAT. There is still a chance however that sellers would initially absorb the added cost to keep their prices low and competitive, but ultimately, consumers are looking at price hikes with regard to these items.
Airline Tickets:
This one is still kind of murky. Since the VAT law has not yet hit the ground, it can be presumed that the 5% added cost will not be applied to plane tickets. And if the region eventually decides to follow the suit of other countries like Singapore and the United Kingdom, there is a good chance that airline fares will be untouched.
Tourist-spending:
If you are planning to invite some of your relatives or friends over in 2018 and beyond, advise them early on that they will be subjected of the implementation of the VAT law. If they plan on going on a shopping spree, their purchases will definitely have the additional 5% cost of the sale.
Tax refunds for vacationers are still be carefully studied and will be determined in the near future.
Additional Information:
In hindsight, while the cost of living is expected to go up for a lot of people, the change will be very minimal. And depending on one’s spending habits, more or less the VAT law will not necessarily leave you broke.
The UAE, however. does not rule out the possibility of rolling out other forms of taxes in the future. As per global best practice, the country is currently exploring other tax options as well, said the Ministry of Finance. However, these are still being analysed and it is unlikely that they will be introduced in the near future. The UAE is not currently considering personal income taxes.
