Etisalat, UAE's incumbent telecoms carrier. Image Credit: Gulf News

Dubai: Etisalat customers will start paying a 5 per cent VAT in the beginning of 2018.

The telecommunications company confirmed on Thursday that a 5 per cent charge will be applicable to most products and usage of services starting January 1, 2018.

“Starting from 1st January 2018, most of Etisalat’s products and services shall be subject to 5 per cent value-added tax (VAT),” the company said in its notice for customers.

“VAT is a consumption tax that the end user is obligated to pay and Etisalat will be only acting as a collection agent on behalf of the taxation authority.” 

However, not everyone will be paying the 5 per cent VAT. Prepaid users, for example, will not pay any extra fee when they recharge, according to a source. So, anyone who grabs a prepaid card at the grocery or recharge online, won't pay 5 per cent.

But for postpaid customers, the standard rate will be added on the monthly bill.

“The 5 percent VAT will apply on the actual usage of the credit towards Etisalat services and not on the prepaid recharge cards value,” the company said in a statement.

Etisalat said the collection of fee is in compliance with the Federal Decree-Law No. 8 of 2017 issued by the government on the introduction of value-added tax (VAT) in the UAE.

The UAE Federal Tax Authority has mandated that a 5 per cent VAT will be added to applicable telecommunications products and services starting from January 1, 2018.

“Etisalat is taking all efforts to be ready and compliant for the new law coming into effect and provide complete information to all customers and its effect in the future,” the company said.

It added that it has already started reaching out to its customers to inform them of the upcoming tax and provide further clarity on the topic.

Etisalat’s business customers are also encouraged to register with the Federal Tax Authority and submit their tax registration number to the company at the earliest.