Fuel Prices to Rise Due to VAT Implementation in UAE

Posted on Nov 22, 2017

Fuel Prices to Rise Due to VAT Implementation in UAE

VAT is all set to be implemented in UAE from January 1, 2018. A standard rate of 5% VAT will be applicable to both petrol and diesel.

Experts in UAE said that Petrol prices will be subject to value-added tax (VAT) in the UAE from next year.

Thomas Vanhee, founding partner, Aurifer Middle East Tax pointed out that some countries have different VAT rates for commercial and private vehicles, but the UAE has no such intention. Thus a single vat rate will be applicable.

Since petrol and diesel is a business activity, they would be subject to VAT, said Girish Chand, director MCA Management Consultants. "However, considering the low VAT rate and the insignificant composition in the overall spending of an individual, VAT on petrol and diesel would have a negligible impact," Chand added.

Chand further explained that VAT rates are related to business activity, not end users, so there would not be different VAT rates for commercial and individual vehicles.

In UAE has an attempt has been made to align oil prices with international rates and they are adjusted every month by the Ministry of Energy. However, the international transport (of goods and passengers) will be treated as zero-rated supply under VAT.

It is estimated that filling a 50-litre tank with unleaded gasoline 98 will today cost Dh94.5. Following the five percent VAT implementation next year, the prices are expected to rise to Dh99.2. Similarly, the 2017 Land Cruiser 5.7 (EXR) with a 136-litre fuel tank capacity costs approximately Dh257 to fill unleaded 98 but following VAT, the consumer will have to spend approximately Dh270.

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