VAT in United Arab Emirates and Saudi Arabia

Value Added Tax (VAT) has been in the talks of being introduced for a while now in the United Arab Emirates (UAE) and Saudi Arabia. On January 1st 2018, it was finally levied in the two Middle Eastern countries.

VAT in United Arab Emirates and Saudi Arabia
VAT in United Arab Emirates and Saudi Arabia

VAT will be in accordance to a 5% levy and applied to a majority of goods and services. Medical treatments, financial services and public transport are not included in the new VAT levy surcharge. VAT has been brought in as revenues of Middle Eastern governments have fallen due to a reduction in oil prices. UAE estimates revenue of 12 billion dirhams thanks to VAT income.

Middle Eastern countries have a vast population of Indians who settle down thanks to these countries being tax free. However with VAT introduced, there’s no need to panic or go into savings mode. The VAT system implemented is far simpler than India’s simplified GST structure.

Dinesh Kanabar, Chief Executive and Founding Partner of WTS Dhruva Consultants which is a tax advisory firm recently expanded to Dubai said that it’s a very simple law.

“Firstly, you have never seen as proactive a government as you seeing here; they are coming out with FAQS, they are doing seminars, they are training people and they have a portal up and running. Compare this to India where after GST was implemented, people started to complain and then they started making modifications. Here they are hearing peoples concerns before implementation.”

GST is on an average increase of 5 to 28 percent, and hence the 5 VAT is very minimal comparatively. Indians would still find it more beneficial earning and spending in Saudi Arabia and United Arab Emirates.

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Dubai which is one of the states in United Arab Emirates which is the most popular foreign destination for Indian travellers. Out of 53 million visitors in Dubai last year 18 million were from India. With an increase in costs, including hotels, tours and car hires there will be a reduction in tourists from Indi travelling to Dubai.

With two countries in the Gulf already introducing VAT, other members will join in most probably in 2019. These include Bahrain, Kuwait, Oman and Qatar.