VAT begins to roll in Dubai, 100% tax on tobacco products and energy drinks

The Federal Tax Authority of UAE has announced a 100% tax on tobacco products and energy drinks, as well as a 50% tax on carbonated beverages, beginning in the fourth quarter of 2017.

The valued added tax (VAT) will be imposed on imported goods and services unless explicitly exempted by the law. According to the law, an imported commodity or service could be subject to VAT by 5% or exemption from the tax.

Businesses that deal in international transportation, health and education services, commodities and exports and investment gold are exempted from taxes, as are residential buildings for sale or lease during the initial three years in which a building is finished, as well as certain financial services.

All businesses that import any commodity or services must register for the tax if their total imports – that are subject to VAT – exceed the obligatory registration limit, which is Dh375,000.

Registration is optional for businesses with an annual income of Dh187,500 or more.

However, businesses that import or supply goods or services that are exempted from tax need not register, which also applies to businesses that import commodities or services that are not subject to the VAT.

VAT in UAE will come into force from January 1, 2018.

The Federal Tax Authority will open the registration door to businesses, whose tax subjected imports exceed the obligatory registration limit, in the first quarter of 2017.