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Dubai: The Federal Tax Authority has confirmed that both water and electricity will be taxed at 5 per cent from January 1, 2018, according to the recently released executive regulations.

According to the document, water and electricity will be treated as supplied goods, and therefore subject to a 5 per cent value added tax (VAT).

This category of taxable goods are defined in the regulations as the “supply of water and all forms of energy including electricity and gas … whether used for lighting, or heating, or cooling, or air-conditioning or any other purposes”.

“From the beginning, it has been clear that when we talk about power and water, there’s no specific exemption or zero rating,” Julie Bronzi, a senior VAT manager at PricewaterhouseCoopers (PwC) told Gulf News recently.

“It’s not out of the blue,” she added.

According to Bronzi, there was uncertainty around whether public entities like Dubai Water and Electricity Authority (Dewa) would be subject to VAT.

“I think it’s clear for now that there’s no exemption, which is not surprising as it’s the same in Europe, where electricity and water are subject to VAT,” Bronzi said.

The impact of the introduction of VAT on annual inflation in the country is expected to be only a fraction of the rate of 5 per cent, according to experts.