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Air travel, tution fees and doctor’s fees to be VAT free
Air travel, tuition fees, and doctor’s fees will be free of VAT. On Sunday, August 27, The President, His Highness Sheikh Khalifa bin Zayed Al Nahyan, issued Federal Decree-Law No 8 on value-added tax which you can read here.
Five percent VAT will be levied on goods and services from January 2018 as a part of a GCC-wide agreement. Although tuition fees are exempt from VAT, extracurricular activities such as sports classes, music lessons, and school transport will be subject to VAT.
New residential buildings will be subject to zero rated during the first three years of operation after completion which is beneficial not only to prospective buyers of new homes but also good news for the UAE real estate sector. If a property buyer takes a unit directly within three years of completion of the project, the price will be zero rated and they buyer will be exempted from VAT if he wants to sell it later.
Air transport of passengers and goods which starts or ends in the state or passes through its territory, including related services, have been categorized as zero-rate d under the law. This is good news for the tourism sector as prices for hotels and restaurants increase with five percent VAT.
“International transportation (including airlines) is zero-rated. Similarly, the supply of local transport is exempt from VAT. The supply of international transportation of passengers and/or goods and its ancillary services are also zero-rated. The supply of local passenger transport in a qualifying vehicle, vessel or aircraft too is exempt from VAT,” said Girish Chand, director MCA Chartered Accountants.
The UAE is home to more than eight million expatriates from over 200 nationalities who fly regularly to their home countries in addition to traveling to other destinations of tourism.
Dubai International Airport received 43 million passengers in the first half of 2017, an increase of 6.3 per cent. In addition, a record 8.06 million international overnight tourists arrived in Dubai during the first six months of 2017, a 10.6 per cent increase over the same period last year.
Air travel would remain competitive for low-cost airlines who can price their fares more aggressively. At the same time, those who fly long haul on Emirates and Etihad will not have to pay extra on flights, particularly to the US where demand was seriously hit earlier this year due to the travel and electronics ban, he added.
The new VAT legislation also prohibits anyone having business in the UAE not to have more than one tax registration number (TRN).