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Abu Dhabi, UAEThursday 21 June 2018

Consumer watchdogs ready to crack down on VAT overcharging

Retailers can expect stiff fines if they are caught adding more than five per cent after the tax comes into force on Monday

VAT was introduced in the UAE on January 1, 2018. Pawan Singh / The National
VAT was introduced in the UAE on January 1, 2018. Pawan Singh / The National

Retailers who are considering sneaking in a price rise of more than the legally allowed 5 per cent to accommodate for VAT should think twice – officials have said they will be monitoring price increases after the new tax takes effect at 7am on Monday.

Fines for overcharged VAT begin at Dh500 and can rise to Dh15,000 for repeat offences.

Eleven store owners in Dubai have been caught adding VAT to prices a full month before the introduction of the sales tax, according to officials. They have been prosecuted and fined by the city’s consumer protection watchdog.

For those businesses who think they are wrongly being told to add VAT to their services, the new Federal Tax Authority has created a Tax Disputes Resolution Committee, with a promise that the authority will try to rule within 20 days of an objection being lodged.

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Businesses, however, must charge and pay VAT until the committee rules on their complaint.

For visitors to the UAE, Dubai Duty Free has said it does not expect to add VAT on items at duty free shops, although excise tax on sugary soft drinks is applied.

The Ministry of Finance has also said that foreign businesses will be able reclaim VAT on expenses they incur when visiting the UAE, an important incentive in sectors like the film industry.

What has not been clarified yet is whether ordinary visitors will be able to get back the VAT on goods they buy here. Tax officials have said that tourists are a "significant source of revenue for the UAE and will pay VAT at the point of sale”.

In other countries with a sales tax, tourists can often get a refund at the airport after filling in the required paperwork.

In Dubai, shoppers can take their complaints to the Ahlan Dubai consumer hotline on 600 54 5555. The Federal Consumer Protection Office on 600 522 225 serves all seven emirates.