Food to be taxed, whilst health care and education avoid VAT hike

Dubai

The UAE government offered on Wednesday its most comprehensive insight in to the country’s value added tax law to date, providing a number of clarifications on goods and services such as education and health care.

With the release of the draft copy of the long-awaited executive regulations, which set out government policy on a raft of issues, the Federal Tax Authority (FTA) says it hopes companies have the information they require to begin preparations. Firms have 35 working days left to register for VAT, or else they could face fines. For months, businesses have been awaiting specific details from the authorities on the specifics of the new tax.

The draft regulations revealed a number of apparent changes from what was ititally announced in 2015. For example, it was originallys thought that around 100 essential items would be exempt, but Director-General of the Federal Tax Authority (FTA) Khalid Al Bustani confirmed to Gulf News that all foods will be taxed at 5 per cent.

Experts say that as the law stands, there is nothing to suggest that food will be zero-rated, but that could always change at a later date.

Some believe that it was a question of simplicity: Zero-rating some foods whilst taxing others would’ve been extremely complicated, according to one VAT specialist from Deloitte.

For UAE residents, however, there was a silver lining to the new regulations: Both health care and education, including private schools, were zero-rated, meaning they will not be taxed.

Despite confusion, which the FTA blamed on a mistranslation, over whether only state schools would be zero-rated, the authority has made it clear that all schools sanctioned by the Ministry of Education will be zero-rated.

As for health care, all treatments and medicines prescribed by a doctor or medical professional, will be zero-rated, according to the regulations.

This includes preventive health care.

The only exception to this regulation was for cosmetic treatments and medications, which are considered a luxury.

There was good news for non-residents, with the announcement that there would be a refund process, enabling tourists to claim their VAT back on purchases made whilst in the UAE.