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| 31 December, 2017

UAE motorists to pay VAT on car maintenance

Services like car repairing, oil change and car washes are all subject to VAT in the UAE.

Traffic Jam at Sheikh Zayed Road in Dubai. Services like car repairing, oil change and car washes are all subject to VAT in UAE.

Traffic Jam at Sheikh Zayed Road in Dubai. Services like car repairing, oil change and car washes are all subject to VAT in UAE.

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Car owners in the UAE will need to pay more for the upkeep of their cars once the value added tax (VAT) rolls out next year, experts have said.

In addition to paying more for petrol, residents in the UAE will also need to pay more on car maintenance services such as car washes and oil changes, said Dilip Jain, Principal VAT at Nimai Management Consultants.

"Petrol is liable for VAT," he said. "Also, all services in the UAE are subject to VAT like car repairing services, oil change and car washes. RTA car parking - being part of the public transport system - is likely to be exempt, but clarification is awaited. Parking takes a different meaning: where it is provided as part of the renting out of residential property, it will be exempt; but parking in commercial buildings, RTA parking building, will attract the five per cent VAT."

Since petrol and diesel is a business activity, they would be subject to VAT, said Girish Chand, director MCA Management Consultants. "However, considering the low VAT rate and the insignificant composition in the overall spending of an individual, VAT on petrol and diesel would have a negligible impact," Chand pointed out.

The International Monetary Fund said in a recent note that inflation in the UAE is projected to reach 2.9 per cent next year, from the 2.2 per cent this year on the one-off impact from the VAT introduction, but would stabilise at around 2.3 per cent over the medium term. Experts have noted that VAT rates are related to business activity, not end users, so there would not be different VAT rates for commercial and individual vehicles.

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