Value Added Tax (VAT) at the rate of 5 per cent was introduced in the UAE, and this tax is applicable to a majority of products and services available in the country. A UAE resident now pays VAT on almost everything, starting from food items and utilities, to shopping and consultancy services. To see how much VAT and the resulting small change issue affects us we have analyzed the first 60 days of VAT as follows.
**The Beginning**
On the first day of the UAE’s new value-added tax (VAT), small shops like salons, restaurants, grocery stores and others were the most confused lot, while the informed some were cruising along the change. It was a jittery start as expected but people have been trying to catch up since then.
**The 60th Day**
VAT has completed its first 60 days in UAE last week, I am sure it was not that easy to get people used to of getting invoices inclusive of 5% VAT. A mixed reaction from citizens who were sharing their experiences on social media with images of their lunches, breakfast and bills with VAT, it was a mini nightmare.
**The Experience As VAT Consultant**
It was overwhelming experience I must admit but was worth going through. Seen the most complex transactions and work with all sizes of clients and I believe now that people have started digesting the VAT reality and embracing it.
Market had a massive shortage of knowledgeable consultants which has made it harder for the industry to cope with change.
**Effect of VAT on UAE**
UAE businesses will be least affected by the imposition of value added tax (VAT). Because it is one of the lowest rates in the world and the government will also be pumping back tax funds into the development projects. This in turn, will boost a number of industries in the country, says a new study.
Some businesses have already taken VAT as not only an opportunity rather growth trend to their business. They have stream-lined their businesses and financial activities in order to get positive results from this VAT trend in UAE.
As VAT does not have an overall impact of 5% because the major share of people’s income is being consumed in accommodation which is almost a 35% of overall income. The next 10 to 12% is consumed in travelling which people usually counter by use of public transport which is also VAT free. So the overall impact is not 5% the remaining 45 to 55% which is used in leisure items and buying grocery stuff and other utility bills which is subject to 5% VAT. So the overall average impact is likely to be in between 2 to 3% which is not too hard to digest but its all about the perception.
