The Impact of VAT in UAE CAR MARKET in 2018
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<strong>The</strong> <strong>Impact</strong> <strong>of</strong> <strong>VAT</strong> <strong>in</strong> <strong>UAE</strong> <strong>CAR</strong> <strong>MARKET</strong> <strong>in</strong> <strong>2018</strong><br />
Buy<strong>in</strong>g a car <strong>in</strong> the <strong>UAE</strong> is a big decision because along with the purchase price is attached a<br />
load <strong>of</strong> expenses like <strong>in</strong>surance, fuel, ma<strong>in</strong>tenance, park<strong>in</strong>g fees, etc. To make th<strong>in</strong>gs even<br />
more complicated for the <strong>UAE</strong> nationals, the authorities have now imposed Value Added Tax<br />
(<strong>VAT</strong>). <strong>VAT</strong> came <strong>in</strong>to effect from 1 st January <strong>2018</strong> <strong>in</strong> <strong>UAE</strong> at a 5% standard rate. Ever s<strong>in</strong>ce<br />
then the <strong>UAE</strong> car market has been buzz<strong>in</strong>g the <strong>VAT</strong> debates. Let’s see how <strong>VAT</strong> is currently<br />
impact<strong>in</strong>g the car market <strong>2018</strong>.<br />
<strong>VAT</strong> Application <strong>in</strong> <strong>UAE</strong> Car Supermarket<br />
<strong>VAT</strong> charges depend on the source from which you are buy<strong>in</strong>g the car, that is, whether it is<br />
from a dealer or a car owner directly. If you are buy<strong>in</strong>g a car from a registered car deal<strong>in</strong>g<br />
agency, then 5% <strong>VAT</strong> will be applicable on the car’s purchase price. As for buy<strong>in</strong>g a used car<br />
<strong>in</strong> <strong>UAE</strong>, which is sold through a registered dealer, 5% charges will be applicable on the pr<strong>of</strong>it<br />
marg<strong>in</strong> <strong>of</strong> the transaction.
Gett<strong>in</strong>g Car Loan from the Bank<br />
As <strong>of</strong> now, no <strong>VAT</strong> is be<strong>in</strong>g charged on the car <strong>in</strong>stallments and <strong>in</strong>terests associated with it. In<br />
fact, banks have also not changed their <strong>in</strong>terest rates; this means that for the time be<strong>in</strong>g,<br />
banks are hold<strong>in</strong>g the <strong>VAT</strong> application. However, the process<strong>in</strong>g fees <strong>of</strong> a bank loan varies<br />
from DH 500 - DH 1,500 which is somewhat close to 5% <strong>VAT</strong> charges.<br />
<strong>The</strong> Rise <strong>in</strong> the Yearly Cost<br />
<strong>The</strong> <strong>VAT</strong> charges are not applicable to <strong>in</strong>spection fees and car license registration fees;<br />
however, their prices have been <strong>in</strong>creased a month before the tax became applicable. <strong>The</strong><br />
fees for car license renewal has been <strong>in</strong>creased from DH300 to DH350 (17% rise) and the<br />
<strong>in</strong>spection fee went from DH 140 to DH 170 (20% rise).<br />
<strong>Impact</strong> on Consumption Cost <strong>in</strong> Dubai Car Market<br />
Due to the 5% <strong>VAT</strong>, residents <strong>of</strong> Dubai are deal<strong>in</strong>g with higher consumption cost on related<br />
aspects such as petrol, diesel, gas, etc. While this tax is not applicable to RTA park<strong>in</strong>g fees, 5%<br />
charges are applicable for residential as well as commercial park<strong>in</strong>g. However, if your<br />
residential rent <strong>in</strong>cludes park<strong>in</strong>g charges then <strong>VAT</strong> won’t be applicable. This sudden rise has<br />
made people more conscious about acquir<strong>in</strong>g a car and people who already possess one are<br />
concerned about the additional cost rise.
Rise <strong>in</strong> Cost <strong>of</strong> Service and Repairs<br />
<strong>VAT</strong> has also <strong>in</strong>fluenced the service and repair charges mak<strong>in</strong>g them more expensive. From<br />
periodic service, oil change to simple car wash, 5% <strong>VAT</strong> is applicable to all services. In fact, it<br />
is also applicable <strong>in</strong> the purchase <strong>of</strong> spare parts.<br />
While it is yet to see how <strong>VAT</strong> is go<strong>in</strong>g to affect the yearly car sales, from the current scenario<br />
it is safe to conclude that we will witness a decl<strong>in</strong>e <strong>in</strong> the sales. Both onl<strong>in</strong>e car market and<br />
<strong>of</strong>fl<strong>in</strong>e car market have been affected by the application, but many companies are com<strong>in</strong>g up<br />
with <strong>in</strong>terest<strong>in</strong>g discounts and <strong>of</strong>fers to ensure that people still reta<strong>in</strong> a good deal <strong>in</strong> the<br />
market.