Value added tax and consumer awareness

With the introduction of Value Added Tax (VAT) in the UAE in early January, questions have been raised about the mechanism of implementation and the extent of commitment by the business sectors to ensure that they do not result in illegal price increases, while the value of the tax constitutes 5% of the value of the product.

In this case, statements and clarifications were made by the concerned authorities to clarify the mechanism of calculating the tax and the products subject to it, and indicating the goods to which the zero rate is applied and exempt from tax, as well as clarifying the conditions that must be met in the tax invoice to be collected from the consumer according to the specified percentage.
This coincided with the inspection and control campaigns on the markets by the competent authorities, to ensure the proper application of tax collection and non-manipulation or the imposition of price increases on goods and services, which is a state of reassurance to consumers not to significantly affect their expenses.

Amid this momentum, several questions have also arisen concerning the imposition of tax on free zones until the decision of the Council of Ministers regarding the areas set for the purposes of the Federal Law on Value Added Tax issued by His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE The ruler of Dubai, to determine 20 areas in the UAE treated as outside the state in accordance with a federal law decree on VAT applied locally by 5% on the supply of most goods and services.

This important decision, which supports the state’s tendencies in attracting investment and providing an ideal business environment, was followed by the Ministry of Finance clarifications that the place of supply is generally determined based on the location of the goods, activities and parties involved in the transaction,
Thus, if the place of supply is in the specified area, the supply may also be outside the tax.

With all these measures taken by the State to ensure that the tax is not used and to clarify all the mechanisms for calculating it, which provided extensive explanation to the public, consumer awareness remains an important factor in controlling the markets by playing the role of immediately reporting any irregularities to achieve compliance from all sectors of business. Manifested in some in conjunction with that step.

Rasha El Sharkawy