Essential food items will NOT be exempt from VAT
In a surprise move by the UAE government, all types of food in the UAE, including staples such as bread and rice, will be taxed from January 1, 2018, reports Gulf News.
“In the UAE, all food will be subject to standard rate [of 5 per cent], and we don’t expect that to change in the next couple of months,” said Deloitte tax expert Ewelina Maka.
“The GCC treaty provides member states with the option to choose whether to tax food, and the UAE and Saudi Arabia decided to tax food,” Maka added.
Back in 2015, when the GCC first announced the introduction of value added tax (VAT), about 100 food items were initially announced by the Ministry of Finance to be zero-rated. Zero-rated means that the government exempts some essential goods and services from taxes.
However, this is no longer the case, and UAE residents can expect to see the prices of staples such as eggs and milk rise come the new year.
VAT is being introduced in the UAE in order to increase state revenue, and taxes are expected to generate around Dh7 billion in annual revenues for the Federal Budget.
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