Dubai: All types of food in the UAE, including staples such as bread and rice, will be taxed from January 1, 2018, the Federal Tax Authority (FTA) told Gulf News on Wednesday morning.
The public has long-expected certain food staples to be zero-rated, or exempt, from the 5 per cent tax increase.
The UAE residents will have to pay 5 per cent value-added tax (VAT) on food, water and power and higher education from next year, analyst said.
Girish Chand, director, MCA Management Consultants, said both Saudi and the UAE authorities have brought these categories under the VAT.
Khalid Al Bustani, director general of Federal Tax Authority said, the tourists in the UAE will also get refunds on the returns. He further said that they are working with the parties involved in the project.
Zero-rated refers to the preferential status the government gives some essential goods and services, meaning their sale is not taxed.
Director-General of the FTA, Khalid Al Bustani, told Gulf News at a media event on Wednesday: “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.”
The list Al Bustani referred to was issued at the end of August, and included goods and services such as public transport, commercial airlines, investment-grade precious metals, the supply of crude and natural gas, and education and health care.
Many of these goods aren’t taxed because they provide beneficial services to society, whilst others avoid tax simply because they are too complicated, such as financial services.
When Gulf News asked Al Bustani if food would be zero-rated, he responded: “No.”
Initially, an official from the FTA said, there was a list that was agreed on between the GCC member states, with each country choosing whether to zero-rate each item or not.
According to UAE government estimates in September, the taxes are forecast to generate around Dh7 billion in annual revenues for the Federal Budget.
In 2015, about 100 food items were initially announced by the Ministry of Finance to be zero-rated, leading to confusion among the public when this later changed.
At the time, Younis Al Khouri, undersecretary of the UAE’s Ministry of Finance, told Gulf News in an interview: “We have agreed to exempt some of the food [products] — approximately 94 items.”
Around a year and a half later, however, this does not appear to be the case any longer.
VAT on Education
Under the VAT regulation, higher education institutes which are more than 50 per cent funded by the government, will not be charged VAT but the rest will be.
Khalid Al Bustani, director general of Federal Tax Authority, on Wednesday said the tourists in the UAE will also get refunds on the returns. He said the authority is working with the parties involved on the project and expected to be rolled out ahead of VAT implementation.
Surandar Jesrani, partner and CEO, Morison MJS, said the education services shall be taxable at zero per cent only if it is supplied by a recognised educational institution and offer recognised curriculum.
Recognition should be given by the education ministry or competent government entity.
"In case of higher education institutions, the institution should be either owned by the Federal or local Government or receives more than 50 per cent of its annual funding directly from the Federal or local Government," he said.
Jesrani said a supply of goods or services provide by educational institutions directly related to above shall be zero-rated.
"We expect tuition fees, study material for the curriculum, medical fees, registration fees, admission fees, exam fees would be 0 per cent," he said.
However following services shall be taxable at 5 per cent even though provided by recognized educational institutions:
1. Goods & services supplied to persons who are not enrolled in the institute.
2. Any goods other than educational material provided which are not related to the curriculum of the educational institute.
3. Supply of School Uniforms as required by the educational institute.
4. Providing electronic devices irrespective of whether or not supplied as a part of educational services.
5. Foods & Beverages supplied at the educational institutions
6. Excursions or field trips unless directly related to the curriculum of the educational services.
7. Extracurricular activities provided by or through the educational institutions.
8. Supply of membership in a student organization.
