These telecom services will be subject to 5% VAT

The uae telecom Regulatory Authority (TRA) on Monday clarified that the residents using postpaid service will have to pay five per cent VAT on the total amount of the package.

As for recharge cards, the tax will not be applied to the face value of the recharge; but on the prices of the services used by the user from the recharged amount.

This means that the consumer will not charged five per cent VAT when buying a Dh50 recharge card from a shopkeeper, but on the value of the call he makes. For example, the consumers makes a one minute call of 30 fils, he will be charged 5 per cent VAT on that amount.

VAT will also be calculated at 5 per cent upon purchase of a new SIM after January 1, 2018.

In general, the final consumer is the one who bears the cost of this tax, while businesses — including telecom companies — collect and calculate the tax, as a tax collector for the Federal Tax Authority.

As of January 1, 2018, price of services in the UAE’s telecom sector will be inclusive of VAT. However, this will apply to telecom services to which VAT is not applicable pursuant to Federal Law No. 8 of 2017 on Value Added Tax and its Executive Order — for example international roaming services, TRA said.

The number of mobile phone subscribers in the UAE grew 2.4 per cent year-on-year to 18.7 million in H1 2017. Etisalat’s subscribers grew three per cent to 10.5 million; while du registered 1.23 per cent growth during H1 with its subscribers reaching 8.2 million.

As part of the GCC agreement, the UAE will levy five per cent VAT on a host of goods and services from 7am on January 1.