VAT in UAE: How It Is Going Impact Car Ownership

February 10, 2018 Carfix Compare

How much taxes you have to pay for buying a used or new car largely depends on whether you are buying from it from a dealer or an individual or agency.

Owning a car in UAE means hefty repair and maintenance bills and expenses that include fuel, parking, regular checks, insurance, parking and more. The residents of Dubai, who are accumulating or arranging finances for buying their favorite cars may not be aware of the introduction and implementation of value-added tax (VAT). This decision by the federal government is surely going to lead a big impact on the automobile industry as people will now have to pay 5% VAT in UAE on the purchase of brand new cars.

Value Added Tax (VAT) On Car Ownership

Cost of Buying a Car

Since VAT in UAE largely depends on where you are buying it from like mentioned earlier. For buying a brand new car from an agency or a dealer, you will have to pay 5% tax on the car’s value or the market price of the car. However, the verdict is still not clear, whether the value will be determined, applied or valued at 5% of actual invoiced price or 5% of recommended selling price. However, when it comes to buying a used car from an individual, no VAT will be charged. On the other hand, those used cars getting sold in the market through an agency or a dealer but are registered under the original owners will have to 5% VAT in UAE on the profitability of the car dealers.

Car Loan from the Bank

When it comes to VAT valuation on the acquisition of car loan from the bank, 5% tax will not be charged on car loan installments and interest rate since bank loans are kept free from tax. However, 5% tax will be charged by the banks on the car loan processing fee ranging from Dh500 to Dh1500.

Annual Costs

NO VAT in UAE will be charged on car license registration and car inspection fees since the prices were increased by 17% and 20% respectively just one month ago by the federal government. However, 5% VAT will be charged for car insurance and renewals.

Consumption Costs

Since the prices of petrol, gasoline, and diesel were also increased by 5%, the consumption cost in contrast with the past trend will also increase. Salik tags and recharge cards are exempted from 5% VAT increase. For commercial and residential parking services, VAT is applicable but not on RTA parking.

Servicing and Repairs

For servicing and repairs, 5% VAT in UAE will be charged for periodic car servicing, car wash, spare parts and car repair services.

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