For international visitors to Dubai and the UAE, the introduction of a value-added-tax, or VAT should not be any great cause for concern. There are a few specific considerations when evaluating the impact this will make on your vacation. It is only 5% and should be included in the price of your Dubai activities.
DUBAI’S GOODS AND SERVICES TAX COMPARED TO OTHER COUNTRIES
At just 5%, the VAT rate in Dubai is significantly less than other major tourism destinations such as…
• Netherlands 21%
• UK 20%
• Germany 19%
• Turkey 18%
• China 17%
• New Zealand 15%
• Australia 10%
• France 10%
DUBAI’S VAT REBATE SCHEME
The good news is, there are solid indications that there will be a VAT rebate scheme for anyone travelling on a “Tourism Visa”. This means you can still shop to you drop and that there is no reason not to go crazy and buy that Prada handbag or that Breitling watch you just can’t stop thinking about. However, there will not be any rebate based on services and this is where it is uncertain how individual business will treat this extra expense.
The UAE Government has made it clear that any advertised rate cannot have the 5% VAT added afterwards. This means that the rate you see on a menu, online or in a brochure is what you need to pay. You may see that many companies have included statements such “Prices may incur a 5% increase if the planned introduction of VAT goes ahead on January 1st, 2018”.
There has been a great deal of uncertainty if the VAT will go ahead as scheduled as the full rules and regulations have yet to be released. It is also a unique challenge as there are currently no corporate or income tax so this will be a significant change to the way many businesses in the UAE operate. Either way, businesses have the flexibility to absorb some, all or none of the VAT. This is why Economists have predicted that the overall cost of living in Dubai will increase by just 2.5%, not the full 5%.