Retailers use VAT to spur big-ticket item sales

Residents are receiving emails and text messages advertising big-ticket purchases before value-added tax comes into effect.

On January 1, a 5 per cent levy will be applied to most goods and services.

One promotion, from Al Tayer-Premier Motors, offers customers 5 per cent cash back if they buy a Maserati before December 20.

Emails from online retailers have also used the preVAT lure.

“I don’t think VAT will have an impact for me,” Dubai resident Omair Saya said. “Things are going to become 5 per cent more expensive but I wouldn’t go out of my way just to save that.”

The UAE and Saudi Arabia will introduce VAT next year, to be followed by other GCC member states.

The Federal Tax Authority has published a list of how VAT will be applied. Businesses meeting a Dh375,000 annual revenue threshold must be registered for VAT before January 1 or face fines.

Only VAT-registered businesses have the right to charge customers the levy.

Last week, the Ministry of Finance released a detailed list of offences that would be subject to monetary fines.

The tax authority said that for any price reduction, such as “buy one, get one free” sales, the levy is applied to the reduced price, not 5 per cent on the pre-sale price.

Souq.com chief executive Ronaldo Mouchawar said that the company did see big business with its “White Friday” sale last month.

“We doubled business compared to last year in terms of units sold,” he said, adding that it was mostly big-ticket items such as televisions.