Charged but not taxed
Financial services such as interest rates on loans and credit cards and the issuance and transfer of equities or debt securities will be exempt from the new five percent value-added tax (VAT) that was recently implemented on an array of goods and services in the United Arab Emirates, a new infographic by the country’s Ministry of Finance confirmed on Sunday.
VAT was introduced for the first time in the UAE this month. Last year, the country’s Ministry of Dinance and Federal Tax Authority (FTA) organised several workshops to help the public understand the new tax and its impact.
On Sunday, the infographic by the Ministry of Finance detailed how some financial services will be treated under the new VAT regime. It also had information on the VAT’s impact on other sectors, as illustrated below,
All six countries of the Gulf Cooperation Council (GCC), including Saudi Arabia, the UAE, Kuwait, Qatar, Bahrain and Oman agreed in 2016 to introduce VAT to initiate a new source of income after the sharp fall of oil prices that started in 2014. However, only the UAE and Saudi Arabia have introduced VAT so far, which started on January 1 in both countries.
The economy of the Gulf Cooperation Council region is highly dependent on oil. Saudi Arabia is the world’s biggest exporter of oil. The kingdom reported a historic budget deficit of $98 billion in 2015, a figure that later went down to $79 billion in 2016, then to $61.3 billion last year. The kingdom expects this year’s deficit to be $52 billion.
In the UAE, VAT was applied on food, clothes, jewellery and cars. But most products and services related to transportation, residential buildings, healthcare and education were subject to special VAT treatment, as illustrated above.