VAT Implementation in the UAE has greatly affected the prices of new and used cars, however it has also affected other services related.
It’s pretty obvious if you have purchased a car from a dealer or an agency you have to pay 5% of VAT on your purchase however, how the tax is applied to that sale is still unclear as it can be applied on the selling price or at the actual invoice.
Bill Carter, chief systems and innovation officer at Autodata Middle East, said if a dealer buys the car for Dh80,000 and spends Dh5,000, his costs are Dh85,000.
“He then sells for Dh100,000 and VAT is charged on the Dh15,000 profit, costing Dh750,” said Mr Carter.
The best way to buy car without having to pay VAT is to buy from other consumers as there is no VAT on consumer to consumer sale. It is better to buy directly from the owner rather than dealing with an agency.
VAT effect on Car loans
Even though the VAT is not applied on the car license or the registration, the prices of the government services increased after the VAT implementation. The car license renewal fee has been increased fron DH300 to DH350 along with the increase in inspection fee that went up 20%.
VAT effect on Car Insurance
VAT is applied to car insurance, so factor that increased cost into your budget.
This is in addition to new regulations for the car insurance industry that were rolled out at the start of 2017.
They included increasing the maximum liability for third-party damage from Dh250,000 to Dh2 million. This stipulation, along with other changes, increased the cost of car insurance policies across the board.
Data from the comparison site yallacompare.com found that drivers in the UAE paid an average of 14.9 per cent more for their car insurance in 2017 than in 2016.
VAT effect on consumption Cost
UAE residents have also faced higher consumption cost because of the implementation of VAT in the UAE, as VAT is applied on the cost of Fuel and other products like oil and gas at the pumps.
Salik Tags and rechargeable cards are still exempt from VAT.
If your residential rent includes the charges for your car parking. VAT will not be applied to you.
VAT effect on car service and repairs
After VAT implementation people have greatly faced higher prices on maintenance services such as oil changes or car repairs, that includes purchasing spare parts, car wash or other car maintenance services.