Effect On Tourism Industry Due To VAT In Dubai

With the introduction of VAT in Dubai, its tourism industry is facing a number of changes and transformations. Travel and tourism sector is a part of UAE’s national economy with an average national contribution of Dh130 billion, annually.  A recent forecast in UAE has prompted an increment on international tourism revenue by 7 per cent annually. The UAE government is expecting a steady growth by 2020 with contemporary openings of new attractions like Motiongate Dubai, IMG Worlds of Adventure, Bollywood Parks and many more.

Now, the question is with the impending roll out of VAT in Dubai, what is going to the impact on tourism sector? Businesspersons are already concerned about their VAT return 

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and there is a lot more things doings rounds in the corner. Subsequent to this, you can find some of the recent impacts on tourism industry since the induction of VAT in UAE –

 Which of the companies have to be a VAT registered business?

According to the ministry of finance in UAE, businesses with annual turnover of more than Dh375,000 are compelled to register under VAT law. The update also informs that the trades with taxable turnovers between Dh187,500 and Dh375,000 come under the regulation of “optional VAT registration”.

      Is there any impact of zero-rated supplies on Dubai Tourism?

The tourism sector in Dubai can be categorized into several sub-divisions viz. luxury, medical, meetings, education, exhibitions, events and other special interest groups. According to recent updates, education and healthcare segments are subject to zero-rated supplies but the details are yet to be announced.

      What is the effect of current GCC VAT framework on events like World Expo?

If Dubai tourism industry hosts international events like World Expo, it may be subject to zero-rated or standard VAT rate. According to GCC VAT framework agreement, the option of selecting a scheme completely depends on the hosting members. This is going to have a positive impact on the larger exhibitions where 5% standard rate may show significant impact.

      Can they tourists claim back the VAT charges and administrative charges?

It is true that tourists are allowed to claim back the VAT charges they have paid. Considering lower administrative charges and VAT charges, the refund amounts is expected to be nominal. Once the UAE government introduces this scheme, the tourists are subject to take the administrative burden and the original refundable amount.

Till now, the road towards the execution of VAT is full off hurdles, errors and trials. However, UAE government believes that, once streamlined, this taxation is going to be the cornerstone of Dubai’s economic system.