DUBAI, UAE —- IF Philippines implements TRAIN, the United Arab Emirates impements Value Added Tax (VAT) starting January 1, 2018 respectively.
VAt here is a tax on the consumption or use of goods and services levied at the point of sale. It is a form of indirect tax and is used in more than 180 countries around the world, including the Philippines.
However, VAT will only be experienced by consumers for the first time in the UAE, which is levied at 5 percent on goods and services, including water and energy which is a considered
But there are items, services and good which are not covered like healthcare, education, government services, aviation and salaries however.
In its official statement, the UAE government assured that the new form of taxation will provide the country a new source of income which will be continued to be utilized to provide high-quality public services.
It will also help government move towards its vision of reducing dependence on oil and other hydrocarbons as a source of revenue, the statement said.
What Pinoys say on VAT
UAE residents, including Filipinos, have been made aware of the VAT and its effect on their cost of living since early last year. Expats are becoming more conscious of their purchases in
line with the costs after taxes.
Albert Gayo, 46, IT support engineer, who shoppped at the grocery section on January 1, 2018 said VAT is already reflected on his receipt.
“Yung pinamili ko na worth Dh42.75 ay naging Dh45 na rounded off. So kung mas marami ang bibilhin mo, mas mataas ang babayaran mo in total. Dapat na talagang maghigpit ng sinturon kundi walang matitira sa mga sahod natin nito (I purchased Dh42.75 but because of VAT I paid Dh45 as rounded off. So if I buy many goods, meaning I pay much higher, It is high time to stay within our budget or else, nothing will be left),” he said in jest.
Anticipating the VAT implementation, Abu Dhabi-based business women Mylene Escano, 44, said she has already made some adjustments to her household budget since November. She
also advised other OFWs to be flexible and make some lifestyle changes to withstand the impact of VAT.
“If we are used to eating out often in a month, let’s reduce this habit. Magluto na lang sa bahay. For recreation, just go to the parks or beaches. Go elsewhere instead of going to the malls to
avoid expenses. Kasi with VAT, lahat halos doble na ang cost,” said Escano.
VAT on businesses servicing Pinoys
The implementation of VAT in the UAE has not just affected consumers here.
It even has a broader impact on businesses, according to industry experts.
Some business owners said they are still getting acquainted with the new system and incorporating it in their operating structures, although they have already informed their customers in advance there will be a “slight increase” in prices because of VAT.
Service providers like the courier service companies have not yet applied VAT in their services. Sending balikbayan or cargo boxes to the Philippines is still VAT-free, although it is only
for the time being.
“We are not extending VAT to Balikbayan boxes as yet and will absorb the cost to see how our Filipino market responds. Our rates will remain the same as of December last year and hope
we can capture a larger market. Our objective is to extend better service and offer a range of attractive promos to our loyal clientele,” Roomi Sarkari, Director of JRS Logistics LLC told
Sarkari added, his company has come up with a new scheme to keep loyal customers in their roster and attract new clientele when they eventually apply VAT to their services.
Flomic Freight and Logistics, is also currently using old rates for their cargo services to the Philippines, although Efren Artillaga, its Philippine Cargo Supervisor said, they are now
drafting the new rates with VAT.
Artillaga added their Filipino customers were in a rush to ship their cargoes before the December holidays to avail of lower rates.
“Nagrush ang iba nating mga kabayan. Naghabol ng padala para makaiwas sa tax. Natakot sila baka malaki ang itataas ng rates dahil dito,” said Artillaga.
Remittance companies on the other hand, have already applied VAT effective January 1, increasing the cost for at least Dh1 per transaction.
“Our remittance fee to the Philippines is now Dh21 from Dh20 last year. All customers have been informed by us so they were expecting the increase. They are still happy with our quality
of service,” said Richard Vincent, Senior Business Development Manager at LM Exchange.
Experts’ opinion and advice
Since the beginning of last year, professionals in the finance and accounting sectors in the emirates have been preparing for their administrative responsibilities in the implementation of
Many of these professionals believe the 5 percent VAT on consumer goods will work to the advantage of consumers.
“I support and understand the positive impact of the VAT with the government, which will be returned to the residents in terms of excellent infrastructure and services,” commented
Lyndon Magsino, chairman of PICPA Dubai Chapter.
“Filipino expats in the UAE are enjoying the tax-free salaries so I think the 5 percent VAT will not significantly affect the consumers. While majority of consumer goods are taxable, education and healthcare will be VAT-exempted, hence, the public won’t be substantially affected,” he added.
Angelito Catacutan, a financial expert working at a major accounting firm, has advised that Pinoy consumers “to accept the reality of VAT”.
“We have seen that prices have went up. Everything will be costlier by at least 5 percent, but it will take few months to see if the market will limit the general inflation to 5 percent or if it
will push prices higher than 5 percent,” he said.
To lessen the impact on cost of living, Catacutan advised: “Prepare a financial budget and stick to it. There is no guarantee and requirement for companies to increase employee salary so everyone should know how to allocate their salary to meet their expenses in Dubai; the money they send back to the Philippines; and at the same time save enough money for investments and retirement plans.”-Henri Abenis-MAcahilo-/Newsline.ph UAE