DUBAI // The sale and rent of homes will be exempt from VAT, but buying or leasing commercial property will be subject to the 5 per cent tax. Hotel and restaurant bills are set to rise, and monthly phone and internet charges could also be affected. The Ministry of Finance said last week that <a href="http://www.thenational.ae/business/economy/commercial-property-sales-subject-to-vat-from-next-year--but-residential-is-exempt">properties for residential use will be exempt from the tax</a>. While registered businesses can recover any increase in commercial rents due to VAT from the Government, experts do not expect companies to take a hit. “Most retailers will be able to claim the VAT back and offset it against the VAT they charge consumers,” said Justin Whitehouse, of the consultancy Deloitte Middle East. “The VAT on rent is not a cost to them.” Most commercial tenants will be registered for the VAT because the yearly threshold is at a low Dh375,000 for businesses providing taxable goods or services. In line with VAT worldwide, phone and internet services could be subject to the tax, but du and Etisalat have not yet commented. “We would need to see the legislation but our understanding is that as a broad-based tax it will be applied on most goods and services, so hospitality and the telecoms sector would be subject to VAT,” said Jeanine Daou of global accountancy firm PricewaterhouseCoopers. It was too early to anticipate how businesses would respond, experts said. “We have to see how the businesses reflect the 5 per cent – if they pass it fully to customers or look at absorbing it,” Ms Daou said. “This is a commercial decision made by businesses and very much depends on the market.” Plans for overseas holidays should stay on course because in most countries with VAT, international travel is exempt. <strong>__________________________________</strong> <strong>Value Added Tax in the GCC</strong> Pawan Singh / The National ■ <strong>Analysis:</strong> <a href="http://www.thenational.ae/business/economy/who-should-worry-about-vat-in-the-uae">Who should worry most about VAT in the UAE?</a> ■ <strong>Analysis:</strong> <a href="http://www.thenational.ae/business/economy/all-in-the-details-for-value-added-tax-in-the-gcc">All in the details for value added tax in the GCC</a> ■ <strong>Q&A:</strong> <a href="http://www.thenational.ae/business/economy/qa-sultan-al-mansouri-the-uae-minister-of-economy-and-his-views-on-vat-infrastructure-spending-and-the-investment-law">Sultan Al Mansouri, the UAE Minister of Economy, and his views on VAT, infrastructure spending and the investment law</a> ■ <strong>Comment: </strong><a href="http://www.thenational.ae/business/economy/the-basics-of-value-added-tax">The basics of value added tax</a> <strong>__________________________________</strong> rtalwar@thenational.ae
