UAE introduces VAT | tutor2u Economics

Tax reform in the United Arab Emirates as VAT of 5% on most goods and services has been introduced from the 1st of January 2018. 

The policy change is part of a strategy to diversify the sources of tax revenues as oil prices have fallen. But there are no plans to introduce income tax, which for the majority of people in the UAE remains zero. 

VAT is a tax on producers, it is charged at each step of the supply chain and consumers generally bear the VAT cost as suppliers pass on the burden of the tax to the final purchaser.

The UAE and other countries in the region have long relied heavily on inward migration of workers to sustain their economic growth. Will the end of tax free living be affected by the introduction of VAT?

Some items will be exempt including for example, tickets on the Dubai metro and the cost of exam fees!

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