VAT to make UAE, 5 other GCC countries costlier by 5%

Beginning 1 January 2018 visitors to the United Arab Emirates (UAE) and five other Gulf Cooperation Council (GCC) states will find these countries, including travel to these countries, costlier as these countries embrace 5 per cent VAT from the New Year.

The hitherto tax-free UAE, which has long been the paradise for expatriate employees, and five other GCC members have agreed to introduce VAT at five per cent beginning 1 January 2018 as they seek to revitalise their economies.

The Gulf economies, hit hard by a drop in oil prices, decided to introduce VAT on a majority of goods and services, including hotels, city tours and car rentals, from 1 January 2018.

The UAE is one of the six Gulf Cooperation Council states to have agreed to introduce VAT at five per cent as they seek to revitalise their economies.

The UAE and Saudi Arabia had in October that said they will implement VAT from 1 January 2018, while the other GCC states like Bahrain, Kuwait, Oman and Qatar are expected to follow suit during the year.

VAT, a consumption tax imposed on goods and services, is generally paid by individual consumers to businesses, which then transfer the funds to tax authorities.

Economies in the Gulf - home to the world's biggest exporters of oil and liquefied natural gas - took a major hit after a global supply glut triggered a drop in prices in 2014.

Their balance sheets have remained in the red despite government austerity measures recommended by the International Monetary Fund, including freezing wages, benefits and state-funded projects, cutting subsidies and raising power and fuel prices.