Dubai: Petrol across the UAE will increase by five per cent from January 1, 2018, according to the director general of the Federal Tax Authority (FTA), speaking to Gulf News.

It is the first time that the FTA has officially confirmed that petrol, or gasoline, will be taxed.

“Yes, petrol will be taxed at five per cent under VAT come January 1,” Khalid Al Bustani told Gulf News this afternoon. He was responding to a question about whether petrol, from service stations and elsewhere, would be taxed.

Al Bustani made it clear that crude oil and natural gas would not be taxed, as per the Federal Decree-Law No. (8) of 2017, issued in August 2017, while everything else would be standard rated at five per cent.

The recently released executive regulations made reference to different types of oils and gasses which would be taxed, but it wasn’t clear if this was explicitly referring to the kind of petrol that people fill their cars up with.

Shiraz Khan, a senior tax adviser at law firm Al Tamimi & Company confirmed Al Bustani’s quote, telling Gulf News that despite the confusion, the fact that neither the law, nor the executive regulations, specifically mentioned petrol, made clear that it would indeed be taxed under VAT.

“The supply of crude oil and natural gas are both zero rated in the decree-law, but you that’s not what you fill your car up with. It seems the petrol you get from petrol stations will be taxed at five per cent from January,” Khan said.

 In November, Saudi Arabia’s General Authority of Zakat and Tax (GAZT) announced that the standard rate of five per cent would be applied to purchasing petrol.

The confirmation came in reply to an online question whether there would be a VAT rate for petrol.

"The VAT rate of five per cent for petrol will be applied starting January 1, 2018," GAZT said.