DUBAI: All types of food in the UAE, including staples such as bread and rice, will be taxed from January 1, 2018, the Federal Tax Authority (FTA) has told on Wednesday morning, November 8. The public was expecting certain food staples to be zero-rated, or exempt, from the 5 per cent tax increase. Zero-rated refers to the preferential status the government gives some essential goods and services, meaning their sale is not taxed.
Director-General of the FTA, Khalid Al Bustani, told at a media event: “The law in the GCC agreement said that any food items would be under the sovereign right of the government to include it [as a zero-rated item]. The law that has been issued did not include it.”
The list Al Bustani referred to was issued at the end of August, and included goods and services such as public transport, commercial airlines, investment-grade precious metals, the supply of crude and natural gas, and education and health care.
Many of these goods aren’t taxed because they provide beneficial services to society, whilst others avoid tax simply because they are too complicated, such as financial services.
When media asked Al Bustani if food would be zero-rated, he responded: “No.”
“In the UAE, all food will be subject to standard rate [of 5 per cent], and we don’t expect that to change in the next couple of months,” said Deloitte tax expert Ewelina Maka. “The GCC treaty provides member states with the option to choose whether to tax food, and the UAE and Saudi Arabia decided to tax food,” Maka added.
She told that the move didn’t surprise her, as it was the simplest approach the FTA could have adopted. “Here in the UAE, the legislation and taxes are a new thing. So from the perspective of applying such taxes, the government has decided to apply taxes across all food,” she said.
In 2015, the Gulf states announced that from 2018, they would introduce a 5 per cent tax on goods and services, commonly known as value added tax, or VAT, in order to bolster state revenues and continue along the path of rapid development and modernisation.
According to UAE government estimates in September, the taxes are forecast to generate around Dh7 billion in annual revenues for the Federal Budget.