RIYADH: Saudi Arabia and the United Arab Emirates imposed 5 per cent value-added tax on Monday on most goods and services to boost revenue after oil prices collapsed three years ago.
According to media reports, the value-added tax, or VAT, will apply to a range of items like food, clothes, electronics and gasoline, as well as phone, water and electricity bills, and hotel reservations.
Other Gulf countries are expected to implement their own VAT scheme in the coming years.
While there are some exemptions for real estate sales, rent, certain medications, airline tickets and school tuition. Higher education, however, will be taxed in the UAE.
Earlier, Stores, gyms and other retailers were seen to make the most of the remaining tax-free days in Saudi Arabia and the UAE, encouraging buyers to stock up before the VAT is rolled out on January 1, 2018 (today).
According to media reports, the cost of living in the UAE is expected to rise about 2.5 per cent in 2018 because of the VAT.
It is pertinent to note that earlier this month, Saudi Arabia unveiled the biggest budget in its history, with plans to spend 978 billion riyals (USD 261 billion) this coming fiscal year as the government forecasts a boost in revenue from the introduction of VAT and plans to reduce subsidies.
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