The Impact of VAT in UAE CAR MARKET in 2018

The Impact of VAT in UAE CAR MARKET in 2018
Buying a car in the UAE is a big decision because along with the purchase price is attached a
load of expenses like insurance, fuel, maintenance, parking fees, etc. To make things even
more complicated for the UAE nationals, the authorities have now imposed Value Added Tax
(VAT). VAT came into effect from 1 st January 2018 in UAE at a 5% standard rate. Ever since
then the UAE car market has been buzzing the VAT debates. Let’s see how VAT is currently
impacting the car market 2018.
VAT Application in UAE Car Supermarket
VAT charges depend on the source from which you are buying the car, that is, whether it is
from a dealer or a car owner directly. If you are buying a car from a registered car dealing
agency, then 5% VAT will be applicable on the car’s purchase price. As for buying a used car
in UAE, which is sold through a registered dealer, 5% charges will be applicable on the profit
margin of the transaction.

Getting Car Loan from the Bank
As of now, no VAT is being charged on the car installments and interests associated with it. In
fact, banks have also not changed their interest rates; this means that for the time being,
banks are holding the VAT application. However, the processing fees of a bank loan varies
from DH 500 - DH 1,500 which is somewhat close to 5% VAT charges.
The Rise in the Yearly Cost
The VAT charges are not applicable to inspection fees and car license registration fees;
however, their prices have been increased a month before the tax became applicable. The
fees for car license renewal has been increased from DH300 to DH350 (17% rise) and the
inspection fee went from DH 140 to DH 170 (20% rise).
Impact on Consumption Cost in Dubai Car Market
Due to the 5% VAT, residents of Dubai are dealing with higher consumption cost on related
aspects such as petrol, diesel, gas, etc. While this tax is not applicable to RTA parking fees, 5%
charges are applicable for residential as well as commercial parking. However, if your
residential rent includes parking charges then VAT won’t be applicable. This sudden rise has
made people more conscious about acquiring a car and people who already possess one are
concerned about the additional cost rise.

Rise in Cost of Service and Repairs
VAT has also influenced the service and repair charges making them more expensive. From
periodic service, oil change to simple car wash, 5% VAT is applicable to all services. In fact, it
is also applicable in the purchase of spare parts.
While it is yet to see how VAT is going to affect the yearly car sales, from the current scenario
it is safe to conclude that we will witness a decline in the sales. Both online car market and
offline car market have been affected by the application, but many companies are coming up
with interesting discounts and offers to ensure that people still retain a good deal in the
market.