UAE to apply VAT to all food items, utility bills

The UAE will apply an upcoming value added tax to all food items and utility bills, according to officials.

Upon first announcing the 5 per cent tax in 2015, the country had said that 100 food items would be zero-rated.

This measure has now been scrapped the Federal Tax Authority’s director general, Khalif Al Bustani, confirmed to Gulf News.

“The law in the GCC agreement said that any food items would be under the sovereign right of the government to include it [as a zero-rated item]. The law that has been issued did not include it,” he was quoted as saying.

Public transport, commercial airlines, investment-grade precious metals, the supply of crude and natural gas and education and healthcare will be zero-rated.

Read: VAT in the UAE: 10 things to know ahead of its implementation

Another UAE publication, The National, reports that water and electricity services will also be taxed.

The cost of living in the country is expected to increase 2.5 per cent next year after the tax is introduced, according to some forecasts.

The UAE’s minister of economy, Sultan Al Mansouri, has said the tax could generate Dhs12bn ($3.26bn) for the country in its first year and Dhs20bn ($5.4bn) in its second year.

Saudi Arabia, the only other Gulf country expected to implement the tax on January 1, 2018, has also chosen to tax food and utilities.

The remaining GCC countries are expected to implement the tax later in 2018 or in early 2019.

Read: All GCC states still committed to VAT but dates will vary, IMF says